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GST FAQ

Frequently Asked Questions

1. What is GST? How does it needs to be played?

GST law is applicable on goods and services. It is a value added tax. Because of this, tax is levied on each stage of value addition of the business transactions. The purchaser gets a set-off of GST paid at each stage at the time of purchase of goods and service. Eventually, the consumer of the goods or services has to pay GST to the person from whom he has purchased the goods or services.

The following tax laws were subsumed in this law:

A) Central Taxes:

  1. Central Excise Duty
  2. Additional Excise Duty
  3. Excise Duty levied as per Medicinal and Toilet Preparations Act
  4. Service Tax
  5. Additional Customs Duty
  6. Surcharge
  7. Cess

B) State Taxes:

  1. VAT
  2. Entertainment Tax
  3. Central Sales Tax
  4. Luxury Tax
  5. Tax on lottery, betting and gambling
  6. Entry Tax
  7. Cess and Surcharge

The features of GST are as follows:

  1. GST is divided into two parts: CGST imposed by the Central Government and SGST imposed by State Government. But the provisions of GST law such as tax computation, tax applicability etc. are the same.
  2. GST is applicable on each and every goods and service except for the exempted goods, services and if the turnover is less than the specified threshold limit.
  3. While paying CGST, ITC of only CGST is allowed. Similarly, while paying SGST, ITC of only SGST is allowed.
  4. Simply, the ITC of CGST and SGST cannot be adjusted against each other.
  5. The way of collecting CGST and SGST is kept as similar as possible.
  6. CGST is administered by the Central Government and SGST is administered by the State Government.
  7. Taxpayers have to file GST returns on a monthly or quarterly basis.
  8. Every taxpayer has a unique GSTIN number of 15 characters which is linked with PAN. Due to this, information exchange between GST and Income tax department has increased.

CGST and SGST is leviable at all points in the supply chain except for some goods, services and threshold limit. Both of the taxes are levied on the value of goods or services at the same rate. CGST and SGST is applicable when the place of supplier and location of recipient is within the same state.

IGST is levied on interstate transactions of goods or services. In GST, both the Central and State Government will levy tax on goods and services. A person effecting interstate sale has to pay IGST on the value addition made after taking set-off of input IGST, CGST, SGST.

In India there were many indirect taxes on goods and services which were levied at different stages right from manufacture till final consumption. Earlier indirect tax included Excise, Customs, Service tax, VAT, etc. In each law there were different definitions and sections and the implementation of the same was done in different ways. Day by day the above things were increasing. That’s why it was very difficult for common taxpayers to know all such provisions and rules. Also, the expenses for following this indirect tax laws were increasing. That’s why GST was necessary in India. In many developed countries there is one single tax like GST which is levied on goods and services. So, to remain in competition on international level, GST was necessary to be implemented in India.

India has a very large population but very few follow tax laws. Due to rigid tax structure, the government was unable to reach every taxpayer thus there were many tax evaders. But the one who follows tax laws for them there are various strict provisions for collecting taxes. Due to GST the number of taxpayers has increased. Other than this there are many reasons for bringing GST.

Central Excise Duty was not levied on distribution part of manufactured goods, thus at the time of sales, the traders couldn’t set off of excise duty paid. Same as above, in CENVAT there were many taxes like additional excise duty, additional custom duty, surcharge which were not included. That’s why they were unable to take set off. GST merged with the set off of indirect taxes on goods and services. Thus, the distribution of goods and services to the end consumer was important at the final stage, which means at every stage of business right from manufacturing to consumption; tax is to be paid on value addition. Also, VAT paid on goods was not getting set off of service tax paid on services.

Because of GST the extra burden of CENVAT and service tax is reduced and set off is available from manufacturer to trader. Because of this there is no cascading effect (tax on tax) which was the main aim of GST. As different indirect taxes are merged into GST, compliance cost of businesses has been reduced.

The following are the benefits of GST:

  1. Many taxation laws were merged into GST.
  2. Double taxation is not there. Tax is applied on the actual value of goods.
  3. All tax provisions on exports have been merged for exporters.
  4. One developed national market has been formed.
  5. Reduced number of tax rates and benefits available, and clarification on difference between goods and services, due which the transactions have been simplified.

Following benefits are received by Government:

  1. Number of taxpayers in India has increased.
  2. The taxation structure has been simplified.
  3. Overall tax income is increased.
  4. Efficiency in usage of available resources.

Following important steps were implemented:

  1. More usage of information technology and computerized systems done in government offices.
  2. GST returns are filed through e-filing portals.
  3. E-payment mode is implemented for GST.
  4. Uniform taxation period.
  5. Arrangement to get complete information.

The government had released GST law and according to it, the nine important definitions of GST are as follow:

  1. Goods: “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.
  2. Services: “Services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged.
  3. CGST / SGST:
    1. “CGST” means the tax levied under the Central Goods and Services Tax Act, 2017.
    2. “SGST” means the tax levied under any State Goods and Services Tax Act, 2017.
  4. IGST: “IGST” means the tax levied under the Integrated Goods and Services Tax Act, 2017.
  5. Person: “Person” includes:
    1. an individual
    2. a Hindu Undivided Family
    3. company
    4. a firm
    5. a Limited Liability Partnership
    6. an association of persons or a body of individuals, whether incorporated or not, in India or outside India
    7. 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
    8. any corporate body incorporated by or under the laws of a country outside India
    9. a co-operative society registered under any law relating to co-operative societies
    10. a Local authority
    11. central government or a state government
    12. society as defined under the Societies Registration Act, 1860
    13. trust and
    14. every artificial juridical person, not falling within any of the above
  6. Works Contract: “Works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
  7. Place of Business: “Place of Business” includes:
    1. 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
    2. a place where a taxable person maintains his books of account; or
    3. a place where a taxable person is engaged in business through an agent, by whatever name called.
  8. Aggregate Turnover: “Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
  9. Business: “Business” includes:
    1. Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit.
    2. Any activity or transaction in connection with or incidental or ancillary to sub-clause (a).
    3. Any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction.
    4. Supply or acquisition of goods including capital goods and services in connection with commencement or closure of business.
    5. 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.
    6. Admission, for a consideration, of persons to any premises.
    7. 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.
    8. Activities of a race club including by way of totalisator or a license to bookmaker or activities of a licensed bookmaker in such club.
    9. Any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.

The provisions which are applicable to all the taxpayers are as follows:

  1. All the information about GST is available at www.cbic.gov.in.
  2. If the aggregate turnover of any person is more than Rs. 20 Lakh in case of supply of goods and services or only services and Rs. 40 Lakh in case of only goods then it is compulsory to take the registration under GST. However, threshold limit is Rs. 10 Lakh in case of goods or services or both in states like Manipur, Mizoram, Tripura, Nagaland.
  3. On interstate transactions IGST is levied, CGST and SGST is levied on intrastate transactions. Similarly, UTGST is levied on Union territory transactions.
  4. Normally, there are 5%, 12%, 18% and 28% tax rates in GST.
  5. In GST, petroleum products like petroleum crude, motor spirit, natural gas, aviation turbine fuel, are temporarily out of the ambit of GST.
  6. In GST, in the case of services, tax is payable on advances also. It means if we give any amount in advance, GST will be levied on it.
  7. In GST monthly/quarterly/annual return is to be filed.
  8. GST is based on supply i.e., at the time of supply, GST will be levied.
  9. As per section 10(1), small taxpayers whose aggregate turnover in a FY is less than Rs. 1.5 Cr for goods (Rs. 75 Lakhs in states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand) and Rs. 50 Lakhs in case taxpayer could not opt for section 10(1) and 10(2) can opt for composition scheme under section 10(2A).
  10. As per the provisions of the composition scheme, GST rate for manufacturers and traders is 1%, for hoteliers it is 5% and for service providers under section 10(2A) it is 6%.
  11. Registered taxable person will get ITC of tax paid on input goods, input services and capital goods, except in case of composition scheme.
  12. In GST, ITC of food and beverages, immovable property, passenger vehicle, goods of personal use, works contract etc. not available subject to certain conditions.
  13. For goods HSN codes and for services SAC codes are used in GST. Tax rates of goods and services are decided using these codes.
  14. Every taxpayer should check tax rates of goods and services according to the schedule and notifications otherwise taxpayers will have to face consequences.
  15. At the time of supply of goods or services the supplier has to give tax invoice to the recipient. The tax invoice shall contain all the information which is necessary as per law.
  16. If the aggregate turnover of taxpayers in preceding FY is up to Rs. 5 Crore then there is need to mention 4-digit HSN code on invoice. If the turnover is more than Rs. 5 Crore then it is necessary to mention 6 digits HSN code on the invoice. If the goods are exported, then it is necessary to mention 8 digits HSN code on the invoice.

The following things will be included in supply as per the GST Law:

  • All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

Supply of Goods consist of:

  1. Any transfer of the title in goods.
  2. 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.
  3. 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, such transfer or disposal is a supply of goods by the person.

Supply of Services consist of:

  1. Any transfer of right in goods or of undivided share in goods without the transfer of title thereof.
  2. Any lease, tenancy, easement, license to occupy land.
  3. Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly.
  4. Any treatment or process which is applied to another person’s goods.
  5. 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, the usage or making available of such goods.
  6. Renting of immovable property.
  7. 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 or after its first occupation, whichever is earlier.
  8. Temporary transfer or permitting the use or enjoyment of any intellectual property right.
  9. Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of Information technology software.
  10. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.
  11. Transfer of the right to use any goods for any purpose for cash, deferred payment or other valuable consideration.

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.

For example, at the time of making sales invoice packing charges, transportation charges, insurance charges are charged then it will be treated as composite supply.

Composite supply comprises of two or more supplies, one of which is a principal supply, shall be treated as supply of such principal supply and will be taxed at the rate of such principal supply. In the above example, the supply of goods will be treated as principal supply and packing materials, transport and insurance will be taxed at the rate of such principal supply.

For example, if TV of Rs. 25,000/- sold with Rs. 500/- for packing and installation charges then GST will have to be paid on Rs. 25,500/- at the rate of GST applicable on TV.

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.

When more than one goods or services are supplied together for single price it is called as mixed supply. If anything can be supplied independently or supply of anything is dependent on other, it will not be classified as mixed supply.

For example, gifts on occasion of Diwali consisting of box of dry fruits having cashew nuts, walnuts, almond, pistachio, etc. are purchased. For seller it will be considered as mixed supply.

Mixed supply comprising of two or more items shall be treated as supply of that particular item that attracts the highest rate of tax. For e.g. Dry fruit box will be taxed at the rate of the item attracting highest tax liability. In the above example, suppose some items are under 12% tax rate and some are zero-rated items, then the entire dry fruit box will be taxed at 12%.

In another example if we supply Corporate Kit consisting of Pen – 12%, wristwatch – 28%, Wallet – 28% and diary – 18%, then corporate kit will be taxed at the rate 28%.

It is mandatory to mention the following things in the tax invoice:

  1. Name, address and GSTIN of the supplier.
  2. A consecutive serial number, in one or multiple series, containing alphabets or numerals or special characters.
  3. Date of invoice.
  4. Name, address and GSTIN or UIN of the recipient, if registered.
  5. Delivery address.
  6. HSN code of goods or SAC code for services.
  7. Description of goods or services or both.
  8. Quantity of goods.
  9. Value of supply of goods or services or both taking into account discount or abatement, if any.
  10. Rate of GST.
  11. Amount of GST on taxable goods or services.
  12. Place of supply in case of interstate transaction.
  13. Whether reverse charge applicable.
  14. Signature or digital signature of the supplier or his authorized representative.

A Bill of Supply is a legal document that is issued by a registered supplier of goods or services in specific situations where a tax invoice is not required.

A registered supplier issues a Bill of Supply instead of a tax invoice in the following cases:

  1. Exempt Supplies.
  2. Composition Scheme.
  3. Reverse Charge Mechanism.

When the advance is received in trade, then receipt voucher should be issued. GST must be charged on advance received in case of services. All the things mentioned in the tax invoice also have to be mentioned in receipt voucher.

Taxpayer cannot make changes in tax invoice after it is uploaded on GSTN. If any changes are required to be made to the invoice, then they have to be made with the help of debit and credit notes. All the information mentioned in tax invoice should be mentioned in debit or credit note.

Every taxpayer has to give the bill-wise details for taxable goods or services of which the tax invoices are issued. For tax free (exempt) goods or services, aggregate amount to be given. After the GST return is uploaded, it cannot be changed but amendments can be made in GSTR-1A before filing GSTR-3B or in GSTR-1 of subsequent month.

The details of outward supplies of goods or services or both furnished in FORM GSTR-1 shall include the-

  1. Invoice wise details of all –
    1. Inter-State and intra-State supplies made to the registered persons and
    2. Inter-State supplies with invoice value more than Rs. 2.5 lakhs (Rs. 1 Lakh proposed in Finance Act, 2024) made to the unregistered persons
  2. Consolidated details of all –
    1. Intra-State supplies made to unregistered persons for each rate of tax and
    2. State-wise inter-State supplies with invoice values up to Rs. 2.5 lakhs (Rs. 1 Lakh proposed in Finance Act, 2024) made to unregistered persons for each rate of tax
  3. Debit and Credit notes, if any, issued during the month for invoices issued previously.

The four rates of GST are determined on the basis of the use and type of goods and services. The four rates are as follows:

  1. 5% – It is levied on essential services, food items and goods that are commonly used. This includes the goods which are mostly used by people.
  2. 12% – It is a standard slab rate.
  3. 18% – The goods that are not included in the above rates are taxed at 18% slab rate.
  4. 28% – This rate is levied on luxurious goods. This includes cars, washing machines, air conditioners, etc.
  5. Maximum GST rate which government can levy is 40%.


On some goods such as luxury cars, tobacco, aerated drinks falling under 28% category, Cess will be levied along with GST. Cess will be levied on taxable value at the specified rate. This helps to compensate for the revenue of government.


The standard GST rate applicable to most services is 18%. This includes services not specifically listed under any other category.

The central government has levied 3% GST on gold.

One of the important features of GST is the composition scheme introduced for small businesses to simplify their compliance burden. Under this scheme, the rate will be dependent on the limit of annual turnover.

Only businesses with an annual turnover below a specified threshold [Rs. 1.5 crore for goods (Rs. 75 lakhs in state of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand) and Rs. 50 Lakhs for services] can opt for the composition scheme.

The GST rates under the composition scheme are 1%, 5% & 6%.

Section 122 of CGST Act deals with penalty for charging incorrect rate of GST. If any registered person supplies any goods or services or both on which any tax has not been paid or short-paid or erroneously refunded, then penalty shall be:

In case other than fraud:

  1. Rs. 10,000 or,
  2. 10% of the tax due from such person, higher of the above shall be levied.

In case of fraud:

  1. Rs. 10,000 or,
  2. Tax due from such person, higher of the above shall be levied.

According to the GST Act, renting of an immovable property would be treated as supply of services. However, GST will be leviable @18% when either an immovable property is given out on lease, rent, easement, or licensed to occupy or any property is leased out, including a commercial, industrial, or residential property for business.

For example, rent of office, shops, factory, etc.

Thus, renting of residential property for residence will not attract GST if the property is rented in personal or individual capacity.

For example, flat given for residence even to a registered person, if acquired in his individual or personal capacity attracts no GST, but same given for office will attract GST.

However, if the residential property is rented to a registered person other than in his personal capacity, then he would be liable to pay tax under RCM subject to certain conditions.

As per the provisions of the CGST Act, 2017, the value of supply of services is the transaction value, i.e., the price actually paid or payable for renting the property, provided that the supplier and recipient are not related and the price is the sole consideration.

Further, the value of rent includes taxes, duties, cesses, fees, and charges levied under any law (other than GST), such as property tax and municipal taxes, if they are charged separately.

For example, if a property is rented for ₹10,000 per month, GST will be applicable on ₹1,20,000 per annum. The security deposit is not included in the value of rent.

A security deposit is not considered as payment for rental services unless it is applied as consideration for such services.

  • If the deposit is taken as a refundable, interest-free amount to safeguard against damages and is returned at the end of the lease, it is not taxable under GST.
  • However, if the deposit (fully or partially) is adjusted against rent or retained by the landlord, then such amount becomes taxable at that stage.

Example: A security deposit of ₹5,00,000 will not form part of the value of rent unless it is adjusted or withheld.

Input tax refers to CGST, SGST, IGST, or UTGST charged on the supply of goods or services, or both, to a registered person under the CGST Act, 2017.

It includes:

  • Tax paid on purchase of input goods
  • Input services
  • Capital goods

It also includes:

  • Tax payable under reverse charge
  • IGST paid on import of goods and services

However, it does not include tax paid under the composition scheme.

Further, input tax credit on capital goods can be availed in one installment.

A registered person can claim ITC only if the following conditions are satisfied:

  • Possession of a valid tax invoice, debit note, or prescribed tax-paying document
  • The supplier has furnished invoice details in GSTR-1/IFF, and the same is reflected in GSTR-2B
  • The recipient has received the goods or services or both
  • The supplier has actually paid the tax to the government
  • The recipient has filed the return under Section 39

No, ITC is not allowed on goods that are:

  • Lost
  • Stolen
  • Destroyed
  • Written off

Additionally, ITC is not available for goods given as:

  • Gifts
  • Free samples

As per GST rules, ITC related to exempt supplies is generally required to be reversed proportionately.

However, ITC is allowed in case of exempt supplies when such supplies are exported.

When capital goods or plant and machinery (on which ITC has been availed) are supplied, the taxpayer must pay:

  • An amount equal to ITC taken reduced by prescribed percentage, or
  • Tax on transaction value,

Whichever is higher.

ITC is not available on certain goods and services, including:

  • Food and beverages
  • Outdoor catering
  • Beauty treatment
  • Health services
  • Cosmetic and plastic surgery
  • Club membership fees
  • Health and fitness center services
  • Rent-a-cab services
  • Life and health insurance
  • Goods used for personal consumption
  • Works contract services
  • Goods/services taxed under composition scheme

(Subject to specified conditions and exceptions)

The important GST returns under the CGST Act, 2017 are as follows:

GSTR-3B and GSTR-1

Every taxpayer is required to file a summary return in GSTR-3B by the 20th of the following month after payment of tax.

Details of outward supplies (invoice-wise) must be furnished in GSTR-1 by the 11th of the following month.

GSTR-1A

As per the proviso to Rule 59(1), after filing GSTR-1 but before filing GSTR-3B for the same tax period, taxpayers can amend or add details of outward supplies using GSTR-1A.

This amendment facility is introduced through Notification No. 12/2024 dated 10th July 2024.

GSTR-2A / GSTR-2B

Taxpayers should regularly verify purchase-related details reflected in GSTR-2A/2B and reconcile them with their books of accounts to ensure accurate ITC claims.

GSTR-4

Earlier a quarterly return, GSTR-4 is now an annual return applicable from FY 2019-20 onwards.

It must be filed by 30th April of the following financial year.

However, as per updates from the GST Council, the due date has been extended to 30th June from FY 2024-25 onwards.

GSTR-5

A non-resident taxable person must file GSTR-5 by the 13th of the month following the relevant tax period.

GSTR-6

An Input Service Distributor (ISD) is required to file GSTR-6 after distributing ITC to branches, by the 13th of the following month.

GSTR-7 and GSTR-8

  • GSTR-7: Filed by persons required to deduct TDS, due by the 10th of the next month
  • GSTR-8: Filed by e-commerce operators for TCS, due by the 10th of the next month

GSTR-9

The annual return must be filed by registered persons in GSTR-9 on or before 31st December of the following financial year.

GSTR-10

A taxpayer whose registration is cancelled or surrendered must file the final return in GSTR-10 within three months of such cancellation or surrender.

Every registered taxpayer under GST is required to file two monthly returns. This results in a total of 24 monthly returns, along with one annual return, making it 25 GST returns per year for a normal taxpayer.

If a business is registered in multiple states, then 25 returns must be filed separately for each state registration.

Even if there are no transactions in a particular month, it is mandatory to file a NIL return to remain compliant under GST laws.

The two primary GST returns are:

  • GSTR-1 – Details of outward supplies (sales)
  • GSTR-3B – Summary return with tax payment

All GST returns are filed online through the GSTN portal, ensuring a streamlined and digital compliance process.

Other GST Returns for Specific Taxpayers

In addition to regular taxpayers, different categories of taxpayers are required to file specific GST returns:

  • Composition Scheme Dealers
    • CMP-08 – Quarterly return
    • GSTR-4 – Annual return
  • Input Service Distributor (ISD)
    • GSTR-6
  • TDS Deductors under GST
    • GSTR-7
  • E-commerce Operators
    • GSTR-8

Mistakes in reporting B2B invoices as B2C transactions can be rectified under GST.

  • If the error is identified before filing GSTR-3B, it can be corrected in GSTR-1A of the same month.
  • If the mistake is identified after filing GSTR-3B, the correction must be made in the GSTR-1 of the subsequent month.

While making corrections, ensure that:

  • The invoice is correctly reported under B2B details
  • The original invoice date is properly mentioned

Timely correction is important to ensure accurate input tax credit (ITC) for the recipient and to maintain GST compliance.

If a taxpayer forgets to report a B2B invoice in GSTR-1, the same can be rectified as follows:

  • If GSTR-3B is not yet filed, the taxpayer can add the missing invoice details in GSTR-1A of the same month, along with the original invoice date.
  • If GSTR-3B has already been filed, the missed invoice can be reported in the GSTR-1 of the subsequent month.

Example:

If a taxpayer forgets to include a B2B invoice of ₹25,000 in GSTR-1 for June:

  • The invoice can be added in GSTR-1A for June before filing GSTR-3B, or
  • If GSTR-3B for June is already filed, the invoice can be included in GSTR-1 for July

Earlier, taxpayers (suppliers) were not able to file GSTR-1 or use the Invoice Furnishing Facility (IFF) on the GST portal if they had pending GSTR-3B filings for the past two months (in case of monthly filers) or for the last quarter (in case of quarterly filers), as per CGST Rule 59(6).

From 1st January 2022, the rules were amended, and taxpayers cannot file GSTR-1 if the GSTR-3B of the immediately preceding month is not filed.

Example:

If a supplier does not file GSTR-3B for the month of January 2022, he shall not be allowed to file GSTR-1 for the month of February 2022.

The consequences of non-filing, late filing, or improper filing of GSTR-1 are as follows:

Case 1:

If a supplier fails to file GSTR-1 on or before the 11th of the following month, the recipient of the goods or services cannot claim Input Tax Credit (ITC) for that month in GSTR-3B, as GSTR-1 is not filed and the ITC is not reflected in the recipient’s GSTR-2B.

For example, if a supplier does not file GSTR-1 for the month of January 2022, the recipient shall not be allowed to claim ITC in GSTR-3B for January 2022.

Case 2:

If a supplier files GSTR-1 after the 11th of the following month, the recipient of the goods or services cannot claim ITC for that month but can claim it in GSTR-3B of the subsequent month in which the GSTR-1 is filed.

Case 3:

If a supplier files GSTR-1 on or before the 11th of the following month but mentions an incorrect GSTIN or reports B2B supplies as B2C, the recipient of the goods or services cannot claim ITC for that month. However, if these errors are corrected in GSTR-1A, the ITC can be claimed.

For example, if a supplier files GSTR-1 for the month of January 2022 incorrectly and the amendment is made in GSTR-1A for January 2022 before filing GSTR-3B of the respective month, the recipient shall be allowed to claim ITC in GSTR-3B for January 2022.

Therefore, from 1st January 2022, it is mandatory for the supplier to file GSTR-1 correctly and on time to ensure proper ITC flow and GST compliance.

In the following cases, the e-way bill is required to be generated:

a.

The e-way bill must be generated by the consignor or consignee if goods are transported using their own or hired conveyance, or by rail, air, or vessel, when the consignment value exceeds ₹50,000 (including GST).

If the goods are handed over to a transporter for road transport, the transporter must generate the e-way bill. If neither the consignor nor the consignee generates it, the responsibility lies with the transporter.

b.

Where goods are sent by a principal located in one State to a job worker located in another State, the e-way bill shall be generated by the principal, irrespective of the value of the consignment.

For example, if Principal A of Gujarat sends a consignment worth ₹30,000 to job worker B in Maharashtra, then A is required to generate the e-way bill.

c.

Where handicraft goods are transported from one State to another by a person who is exempted from GST registration, the e-way bill shall be generated by such person, irrespective of the value of the consignment.

E-Way Bill was made compulsory for interstate supplies from 01st April 2018. However, for intra-state supplies, E-Way Bill was enabled in various states on their respective dates.

In Maharashtra, the E-Way Bill was made applicable from 25th May 2018.

E-Way Bill has to be generated compulsorily for inter-state supply and, in case of intra-state supply, for consignments exceeding ₹50,000 (including GST).

If transport of goods commences without an invoice or E-Way Bill, penal provisions would be attracted. A penalty amounting to the tax payable or ₹10,000, whichever is higher, would be payable in case of default.

Example:

If a cement dealer transports goods worth ₹2,00,000 taxable at the rate of 28% (i.e., ₹56,000 tax amount) without the cover of an invoice or E-Way Bill, then the penalty will be higher of:

  • ₹10,000, or
  • Tax payable on such goods, i.e., ₹56,000

Hence, the penalty in this case will be ₹56,000.

If the tax officer detains such goods, then for releasing such goods and conveyance the owner of the goods needs to pay penalty as under:

a. When the owner of the goods comes forward to pay penalty and tax amount – Penalty will be equal to 200% of tax payable on such goods and the owner also needs to pay tax on such goods at the same time.

In case of exempted goods, the penalty will be 2% of the value of goods or ₹25,000, whichever is lower.

b. When the owner of the goods does not come forward to pay penalty and tax amount – Penalty will be equivalent to 50% of the value of goods or 200% of tax payable on such goods, whichever is higher.

In case of exempted goods, the penalty will be 5% of the value of the goods or ₹25,000, whichever is lower.

c. The taxpayer can also give security for an amount equivalent to amount (a) or (b) above, in the manner prescribed by the officer.

Example:

If cement worth ₹2,00,000 has been detained, the taxpayer has to pay:

  • Tax (₹56,000) as well as penalty of 200% of tax i.e., ₹1,12,000
  • Tax on goods transported i.e., ₹56,000 as well as penalty i.e., ₹1,12,000 [50% of the value of goods (₹2,00,000 × 50% = ₹1,00,000) or 200% of tax (₹1,12,000), whichever is higher]
  • The taxpayer can also give security worth the penalty amount

TDS means Tax Deducted at Source. It is deducted at a certain percentage by the recipient on the amount payable by him for goods or services to the supplier.

The collected tax would be revenue for the government.

Section 51 of the CGST Act, 2017 prescribes the authorities who need to deduct tax, which are as follows:

  • A department or an establishment of the Central Government or State Government
  • Local authority
  • Governmental agencies
  • Such persons or category of persons as may be notified

On 13th September 2018, vide Notification No. 50/2018 – Central Tax, the following were specified:

  • An authority or a board or any other body which has been set up by Parliament or a State Legislature or by any government, where 51% equity or more (i.e., control) is owned by the government
  • Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860)
  • Public sector undertakings

TDS is to be deducted @2% (IGST) for inter-state transactions (for intra-state, 1% CGST and 1% SGST) from the amount payable to the supplier of taxable goods or services, where the total value of such supply under a contract exceeds ₹2,50,000 (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax, and cess indicated in the invoice).

Also, it is to be noted that TDS would not be deducted if the supplier as well as the place of supply are in the same State, but the recipient is located in another State.

Example:

  • The supplier, place of supply, and the recipient are in Maharashtra, i.e., in the same State. Then this would be an intra-state supply and TDS would be deducted by the recipient.
  • If the supplier is in Maharashtra, and the place of supply and the location of the recipient is Delhi, then this will be an inter-state transaction and TDS shall be deducted.
  • If the supplier is in Maharashtra, the place of supply is also Maharashtra, but the location of the recipient (i.e., deductor) is Delhi, then TDS shall not be deducted.

TDS would be deducted when the total value of taxable supply exceeds ₹2,50,000 under a single contract. This value shall exclude taxes and cess leviable under GST.

Example:

If a contract is made for ₹3,00,000 for supply of taxable services and exempt goods, and the value of taxable supply is ₹2,00,000 while the value of exempt supply is ₹1,00,000, no TDS would be deducted on this contract as the taxable value of supply does not exceed ₹2,50,000.

Every taxpayer can file Form GST PMT-09. Now, taxpayers can correct their wrongly paid tax easily.

However, utmost care has to be taken that if tax is incorrectly utilized in GSTR-3B, then this challan is of no use. It only allows shifting of tax lying in the cash ledger.

Once the amount is utilized, no rectifications can be made thereafter. Thus, only one problem can be solved by PMT-09, that is when payment is done in the cash ledger under the wrong head and not utilized.

Following points must be kept in mind by the taxpayer about Form GST PMT-09:

  • PMT-09 is of no use once a wrongly paid challan has been utilized in GSTR-3B
  • GSTR-3B is not editable. Only the reallocation of amount in cash ledger can be done through this form
  • Before utilization of any challan, one can rectify it

HSN code stands for “Harmonized System of Nomenclature” for Goods. This system has been introduced for the systematic classification of goods all over the world.

SAC stands for Services Accounting Code issued by CBIC to uniformly classify each service under GST.

Thus, the issues of rate of tax and classification may be digitalized, and hence invoicing errors may be reduced to some extent.

4-digit HSN/SAC is to be mentioned if aggregate turnover is up to ₹5 crores in the preceding year, and 6-digit HSN/SAC is required if aggregate turnover is more than ₹5 crores.

For aggregate turnover, turnover in the preceding financial year is to be considered.

GSTR-4 is the annual return to be filed once in a year by taxpayers who have opted for the Composition Scheme under GST.

It includes all the information furnished in the quarterly returns filed by the composition taxpayers during that financial year.

All taxpayers registered under the composition scheme under GST should file GSTR-4. GSTR-4 has to be filed on or before 30th June following the end of the financial year.

Example:

If the composition taxpayer is filing GSTR-4 for the FY 2024-25, the taxpayer should file it on or before 30th June 2025.

In GSTR-4, the following details need to be provided:

  • Inward supplies including supplies on which tax is to be paid on reverse charge
  • Summary of self-assessed liability as per FORM GST CMP-08
  • Tax rate-wise details of outward supplies and inward supplies attracting reverse charge during the year
  • GST TDS/TCS credit received
  • Tax, interest, late fee payable and paid
  • Refund claimed from electronic cash ledger

Late fees for not filing GSTR-4 is ₹200 per day of delay (₹100 under CGST and ₹100 under SGST), subject to a maximum of ₹5,000.

This means if you fail to file your GSTR-4 on time, you will incur a late fee of ₹200 per day (₹100 CGST + ₹100 SGST) until the return is filed, with a maximum cap of ₹5,000.

GSTR-9 is applicable to every registered person whose aggregate turnover during a financial year exceeds ₹2 crores.

However, GSTR-9C is to be furnished only when aggregate turnover during a financial year exceeds ₹5 crores.

The copy of audited annual accounts and a reconciliation statement is to be furnished while filing GSTR-9C.

As per Notification No. 30/2021-Central Tax dated 30th July 2021, there are further amendments in the Central Goods and Services Tax Rules, 2017 regarding GSTR-9 and GSTR-9C.

These rules came into force from 1st August 2021. Few important changes have been made in it.

Let’s discuss.

Every registered person whose aggregate turnover is more than ₹2 crores is required to file an annual return in Form GSTR-9 on or before 31st December of the following financial year (i.e., for FY 2023-24 it is 31st December 2024).

Composition taxpayers and Electronic Commerce Operators (ECO) shall furnish annual returns in Form GSTR-4 and GSTR-9B respectively.

Filing of GSTR-9 for taxpayers having turnover of ₹2 crore and below is exempt.

GSTR-9C shall be furnished by a registered taxable person whose aggregate turnover during the financial year exceeds ₹5 crores.

Earlier, GST audit was required and GSTR-9C had to be certified by a Chartered Accountant. However, this requirement has been removed and the form is now to be self-certified by the registered person along with the reconciliation statement, on or before 31st December of the following financial year.

Due to these changes, Part B, where details of the auditor were required to be furnished, has been omitted.

In Part V of GSTR-9C, the words “Auditor’s recommendation on additional liability due to non-reconciliation” have been substituted with “Additional liability due to non-reconciliation”.

The declaration given by the auditor in Part V of GSTR-9C is now substituted with verification by the registered person.

Taxpayer is now required to give a self-declaration along with reconciliation of tax liability in Form GSTR-9C and also keep in mind the applicability of the same.

ITC for the relevant financial year can be claimed up to 30th November of the next financial year or filing of the annual return, whichever is earlier.

Here are the key points of Section 128A that one should be aware of:

  • No Interest and Penalty for certain periods: If a taxpayer has received a notice or an order for the non-payment or short payment of tax without intention of fraud for the period between 01/07/2017 to 31/03/2020, and if they have paid the full amount of tax payable as per notice or order, then no interest and penalty will be payable. All proceedings regarding such notice or order will be considered concluded.
  • Section 74 notices: If a notice was issued under Section 74, which addresses tax dues involving fraud or wilful misstatement, but the Appellate Authority, Appellate Tribunal or a court finds it unsustainable, the proper officer will then treat it as a notice under Section 73, which covers tax dues without fraud or wilful misstatement. Consequently, Section 128A will then apply, potentially allowing for the waiver of interest and penalties if the tax amount is paid.
  • Conditions for Completion of Proceedings: If an application or appeal is filed before the Appellate Authority, Appellate Tribunal or the court against an order of respective authorities, the person must pay any additional tax as ordered by the Appellate Authority, Appellate Tribunal or the court within three months for Section 128A to apply.
  • No Refund of Interest and Penalty: If interest and penalty have already been paid for the said period, no refund will be available under this section.
  • Exclusions: The provisions of this section do not apply to amounts payable due to erroneous refunds. If an appeal or writ petition is pending before the Appellate Authority or Appellate Tribunal or a court and has not been withdrawn, the provisions of this section will not apply.
  • Finality of Proceedings: If the amount of tax specified under notice or order is paid and proceedings are deemed concluded, no appeal to the Appellate Authority or Appellate Tribunal can be filed against such order.

The new scheme has put Development Rights under RCM and hence the GST on Development Rights provided by the landowner is now payable by the developer on an RCM basis.

One should note that the taxability of Development Rights depends on the unsold inventory in the hands of the builder on the date of issuance of the completion certificate.

The builder would pay tax in relation to rights received, but it would be payable on proportionate rights attributable to unsold flats on the date of completion.

GST is a very complex subject for the real estate industry. There is a difference in taxation of land and building.

Any lease, tenancy, easement, or license to occupy land is treated as a supply of services. One must understand the basics of GST when the question of levy of GST arises on lease of land.

Various factors such as who is the supplier, recipient, type of land, number of years of lease, etc., together affect the taxability of lease of land.

Due to the above confusion, recoveries are made by CIDCO and other city development authorities from common people who have taken land on lease for residence also. A lot of questions are raised.

Definition of land is not provided in GST. Exemption from GST is available for long-term lease of 30 years or more of industrial purpose land by specified Government entities only.

For example, a long-term lease given by MIDC for industrial purposes is exempt.

This creates hurdles for residential and commercial purpose land leases under GST. Further, only promoters are exempt from payment of GST under RCM on long-term lease of land of 30 years or more for residential purposes on units booked before completion certificate of the residential project.

For example, if builders take a long-term lease from CIDCO, they are covered under the conditions mentioned earlier. Thus, notices are sent by CIDCO for the above RCM, but exemption from GST is available subject to compliance. GST on lease of plots after 01/07/2017 is applicable at 18% on the total lease amount collected by CIDCO from all.

The new tax rates are:

a. GST @ 1.5% (Effective rate 1% after deducting Land Cost) would apply to:

  • All Affordable Residential Apartments (houses having carpet area up to 60 sqm in metros / 90 sqm in non-metros and value up to ₹45 lakhs are affordable houses)
  • Ongoing projects (Residential Real Estate Projects) of affordable housing where earlier effective rate of 8% after deducting land cost was charged

b. GST @ 7.5% (Effective rate 5% after deducting Land Cost) would apply to:

  • All houses other than houses under Affordable Residential Projects
  • Houses booked prior to 01/04/2019, where the new tax rate would be charged on instalments payable on or after 01/04/2019
  • Commercial apartments such as shops, offices, etc. in a Residential Real Estate Project (RREP) in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments

Works Contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

As we have seen above, works contract service is a composite supply where both goods as well as services are provided under one contract.

The current tax rates are as follows:

  1. If Works Contract Service involves predominantly earth work (that is, constituting more than 75% of the value of the works contract) provided to the Central Government, State Government, Union Territory or a local authority, then the tax rate applicable shall be 12%.

  2. If Works Contract Service is provided by a sub-contractor to the main contractor providing services specified above in point (a) to the Central Government, State Government, Union Territory or a local authority, then the tax rate applicable shall be 12%.

  3. If Works Contract Service and associated services are provided in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles from the nearest point of the appropriate baseline, then the tax rate applicable shall be 12%.

  4. Works Contract Service other than above would be liable to tax @ 18%.

On purchase of a new car, GST @ 28% or 18% is charged depending upon the length and type of car.

Compensation cess is charged depending on the engine capacity (CC) and length of the car. The rate of cess varies from 12% to 15%.

The activities of supply by the trust are fully exempted from levy of tax under the provisions of Sr. No. 1 of GST Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017, i.e., services supplied by an entity registered under Section 12AA of the Income Tax Act, 1961 (43 of 1961) by way of charitable activities.

Also, recently as per the AAR in the case of Jayshankar Gramin Va Adivasi Vikas Sanstha dated 10/11/2021, it was held that if the gift or donation is made to a charitable organization and the payment has the character of gift or donation and the purpose is philanthropic (i.e., it leads to no commercial gain) and not advertisement, then GST is not leviable.

In all other cases, GST is leviable at the rate of 18%.

“Charitable Activities” are defined in the GST notification as activities relating to:

  1. Public health by way of:
    1. Care or counselling of:
      1. Terminally ill person or person with severe physical or mental disability
      2. Person afflicted with HIV or AIDS
      3. Persons addicted to a dependence forming substance such as narcotic drugs or alcohol
    2. Public awareness of preventive health, family planning or prevention of HIV infection
  2. Advancement of religion, spirituality or yoga
  3. Advancement of educational programmes or skill development relating to:
    1. Abandoned, orphaned or homeless children
    2. Physically or mentally abused and traumatized persons
    3. Prisoners
    4. Persons over the age of 65 years residing in a rural area
  4. Preservation of environment including watershed, forests and wildlife

It is important to check whether the activities performed by the Charitable Trust are covered under the definition of “Charitable Activities” as defined above. It may further be cross-checked with the trust deed and objectives of the trust.

DRC-03 is a payment form in which a taxpayer can pay tax by raising the liability voluntarily or in response to a show cause notice issued by the Department.

Following are the cases where a taxpayer can make payment in DRC-03:

  1. Under Rule 42 and 43 of the CGST Rules: Form DRC-03 can be used for reversal of ITC. However, as per the said rules, the amount of ITC can also be reversed by the registered person in FORM GSTR-3B.

    Example: Suppose the total turnover of the taxpayer is Rs. 10 lakhs, out of which Rs. 4 lakhs is exempt, and the taxpayer has claimed total ITC. Then the ITC proportionate to exempt turnover shall be reversed through DRC-03.

  2. Additional liability of tax as per notice issued under Sections 73, 74, 75 and 76: Interest or penalty, including penalty for non-compliance of E-way bill provisions, can be paid through Form DRC-03.

    Example: If a taxpayer receives a notice for additional tax liability under GST, then such liability shall be paid in Form DRC-03.

  3. Additional liability disclosed in Annual Return: Additional liability of tax, interest or penalty disclosed in the Annual Return can be paid through Form DRC-03.

    Example: Suppose for FY 2023-24 there is either:

    1. Increase in outward tax liability, or
    2. Reversal of ITC

    In such cases, the additional liability shall be paid through DRC-03.

Following are the details that need to be given in Form DRC-03:

  1. Cause of Payment: It is necessary to select the cause of payment from the following options:
    • Voluntary
    • SCN
    • Annual Return
    • Reconciliation Statement
    • Others
  2. Payment Date: It will be auto-populated.
  3. Section Number: Mention the section under which the additional liability is to be paid through DRC-03.
  4. Financial Year: Select the financial year for which additional liability is to be paid.
  5. Overall Tax Period: Select the correct tax period.
  6. Act Type: The type of Act under which additional liability needs to be paid such as IGST, CGST, SGST or Cess shall be mentioned.
  7. Place of Supply: It is compulsory to mention the place of supply after selecting the Act type as IGST.

Following are the things to keep in mind:

  1. Billing Series: New billing series for the new financial year w.e.f. 1st April should be started.
  2. E-Invoicing: If the turnover of any preceding financial year from 2017-18 exceeds Rs. 5 crores, then e-invoicing is applicable.
  3. Letter of Undertaking (LUT): All exporters or those supplying goods or services to SEZ without payment of GST should apply for LUT in Form GST RFD-11 for the next financial year.
  4. Composition Scheme: Small taxpayers having turnover less than Rs. 1.5 crore should calculate tax liability under composition scheme and normal option, and accordingly may opt for the option which is beneficial to them considering all the conditions.
  5. Quarterly Return Monthly Payment (QRMP) Scheme: Taxpayers having turnover below Rs. 5 crores shall have an option to select the frequency of GST return filing under QRMP scheme for the financial year till 30th April.
  6. Reconciliation of turnover between GSTR-1 plus 1A and GSTR-3B and books: Prepare and reconcile the turnover as reported in GSTR-1 plus 1A / GSTR-3B with books of accounts for the current financial year.
  7. Reconciliation of outward liability between GSTR-1 plus 1A and GSTR-3B and books: Compile and reconcile the amount of tax shown in GSTR-1 plus 1A and tax paid in GSTR-3B during the current financial year with books of accounts and pay the tax if there is any shortfall through DRC-03 or in the return of subsequent month to avoid litigation and penalty.
  8. Reconciliation of ITC between books and GSTR-3B and GSTR-2B: Prepare yearly reconciliation of ITC accounted in books and ITC availed in GSTR-3B during the current financial year and reconcile the same with GSTR-2B. If transactions are not auto-populated in GSTR-2B, the taxpayer should follow up with suppliers to furnish/report transactions in their GSTR-1 with payment of taxes in GSTR-3B. Further, if ITC has been availed and transactions are not reflected in GSTR-2B, then ITC should be reversed.
  9. Reversal of ineligible ITC: Identify ineligible ITC under Rule 42, 43 etc. (blocked credit / ITC on exempt supplies) already availed in GSTR-3B of the current financial year and reverse/pay the same along with interest thereon to avoid litigation and demand of interest and penalty in future. Further, note that no interest is leviable on reversal of wrongly availed credit but not utilized.
  10. Reversal of ITC if payment not done to suppliers within 180 days: Review that any payment to suppliers is not pending beyond 180 days from the date of issuance of supplier’s invoice to avoid reversal of ITC under Section 16(2).
  11. Payment of RCM: Taxpayer should check and rework RCM liability as per books of accounts with RCM paid in GSTR-3B. Further, RCM as per GSTR-2B should also be checked.

The GST law undergoes changes nearly every week and there have been numerous amendments to the law from the date of its introduction. However, these seven changes can surely be termed as the 7 wonders of the GST law as these have not only made a significant impact on the routine of taxpayers but have also revolutionized indirect taxation in the country:

  1. Dual GST (Taj Mahal): Indian Dual GST system is one of its kind, much similar to its very own Taj Mahal. Taj Mahal is famous for its beauty and likewise the beauty of this dual GST system enables equal revenue sharing between the Central and State Governments and thus ensures harmonized taxation in the country.

  2. ITC Matching (The Great Wall of China): Just like the Great Wall of China, the introduction of GSTR-2B has put a wall on excessive ITC claimed by taxpayers. This automated return is generated on the 14th of every month and displays the ITC available for the taxpayer based on GSTR-1 and GSTR-1A filed by suppliers. Taxpayers can claim ITC only up to the amount reflected in GSTR-2B; thus, it acts as a wall.

  3. E-Invoicing (Chichen Itza): E-Invoicing has been one of the most important introductions in this GST era as these e-invoices are now automatically transmitted to GSTR-1 and thus the dual requirement of furnishing details has been done away with. This is a well-structured approach much similar to the astonishing structures at Chichen Itza.

  4. E-way Bill (Roman Colosseum): Roman Colosseum was an amphitheater where events such as gladiator fights used to take place. Similarly, there have always been disputes between the department and taxpayers regarding movement of goods and the introduction of the e-way bill has now helped oversee the issue to some extent.

  5. Registration – Aadhaar Authentication (Christ the Redeemer): Christ the Redeemer is a tall statue of Jesus Christ at Rio de Janeiro, which seems to oversee the whole city, much similar to the introduction of Aadhaar Authentication which will oversee and strengthen GST registration while preventing bogus registrations.

  6. GSTN Portal (Petra): Petra is known for its out-of-the-world structure and the simplicity of such complex carvings does not fail to amaze tourists. In the same way, the GSTN Portal has time and again proven its competency in handling every GST process right from registration, return filing to refund and cancellation. There have been significant changes to the portal over the years to make the interface more user-friendly.

  7. Uniform Tax Structure (Machu Picchu): Machu Picchu is a sight to behold and renowned for its stunning architecture. The tax rate structure under GST is similarly well constructed and articulated according to demographic distribution and consumption patterns throughout the country. 0%, 5%, 12%, 18%, 28%, etc. are well-defined and uniform tax rates applicable to different goods and services.

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