UNIT 1

1. Concept and Features of Indirect Taxes, Difference between Direct and Indirect Taxes,
Concept of GST, Relevant Definitions under GST Law, Constitutional Aspects of GST

* Indirect Taxes: Concepts and Features

* Indirect taxes are levied on transactions, not directly on the income or profits of individuals
or businesses.

* Tax Incidence vs. Tax Impact:

* Tax Incidence: The actual burden of the tax borne by the consumer.
* Tax Impact: The point at which the tax is initially levied (e.g., on the seller).

* Key Features:

* Shifted Tax Burden: The seller collects the tax from the buyer and remits it to the
government, effectively passing the burden to the consumer.

* Regressive Nature: Can disproportionately affect lower-income individuals because they

spend a larger percentage of their income on essential goods and services.

* Wide Tax Base: Applied to a broad range of goods and services, generating substantial
revenue.

* Consumption-Based: Levied on consumption, potentially encouraging savings and

investment.

* Administrative Ease: Generally easier to collect compared to direct taxes.

* Difference between Direct and Indirect Taxes

* Direct Taxes:
* Levied directly on the income or wealth of individuals and corporations.

* The taxpayer and the tax bearer are the same entity.
* Examples: Income tax, corporate tax, wealth tax.

* Typically progressive (higher earners pay a higher percentage).

* Indirect Taxes:

* Levied on goods and services at various stages of production and distribution.

* The taxpayer (seller) and the tax bearer (consumer) are different entities.

* Examples: Goods and Services Tax (GST), customs duties.

 * Often regressive.

* Concept of GST (Goods and Services Tax)

* A value-added tax (VAT) levied on the supply of goods and services.

* Replaced numerous central and state indirect taxes, creating a unified national market.

* Core Principles:

* Comprehensive: Covers most goods and services.

* Multi-Stage: Tax levied at each stage of the supply chain, with input tax credit.

* Destination-Based: Tax revenue goes to the state where the goods or services are consumed.
* Input Tax Credit (ITC): Businesses can offset GST paid on purchases against GST collected
on sales, avoiding cascading.

* Relevant Definitions under GST Law

* Supply:

* The taxable event under GST.

* Includes 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.

* Goods:

* 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.

* Services:
* 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.

* Aggregate Turnover:

* The total value of all taxable supplies, exempt supplies, exports, and inter-state supplies of a
person having the same PAN, computed on an all-India basis, excluding certain taxes.

* Input Tax Credit (ITC):

 * A mechanism allowing businesses to reduce their output tax liability by the GST paid on
their inputs.

* Constitutional Aspects of GST

* 101st Constitutional Amendment Act, 2016:

* Enabled the implementation of GST.

* Inserted Article 246A (concurrent powers to Parliament and state legislatures).

* Inserted Article 269A (IGST on inter-state trade).

* Inserted Article 279A (GST Council).

* Article 246A:

* Concurrent power to make laws regarding GST.

* Article 279A:

* Establishes the GST Council.

* CGST, SGST, IGST:

* CGST: Central Goods and Services Tax (intra-state).

* SGST: State Goods and Services Tax (intra-state).

* IGST: Integrated Goods and Services Tax (inter-state).

2. GST Council: Constitution, Structure, and Functioning

* Constitution

* Established under Article 279A of the Constitution of India.

* A federal body responsible for making recommendations on GST.

* Structure

* Chairperson: Union Finance Minister.

* Members:
* Union Minister of State in charge of Revenue or Finance.

* Ministers in charge of Finance or Taxation of each State Government.

* Voting Rights:

* Central government: 1/3 of the total votes.

 * State governments: 2/3 of the total votes.

* Decisions require a ¾ majority of the weighted votes.

* Functioning

* Recommendations:

* Taxes, cesses, and surcharges to be subsumed under GST.

* Goods and services subject to or exempt from GST.

* Model GST laws, principles of levy, apportionment of IGST, and place of supply.

* Threshold limits for GST applicability.

* GST rates.

* Special provisions for certain states.

* Decision-Making:

* Decisions are generally made by consensus, but voting is used when necessary.

* Role in Harmonization:

* Ensures uniformity and harmonization of GST laws, procedures, and rates across the
country.

* Facilitates coordination between the central and state governments.

* resolves disputes regarding GST implementation.

UNIT 2

1. Concept of Supply Including Composite and Mixed Supply, Place, Time, and Value of
Taxable Supply, Significance of Consideration

* Concept of Supply:

* "Supply" is the taxable event under GST. It's the trigger for levying GST.

* Section 7 of the CGST Act defines the scope of supply, which is very broad.

* It includes 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.

* Schedules I, II, and III of the CGST Act further clarify what constitutes a supply.

* Composite Supply:
 * A supply consisting of two or more taxable supplies of goods or services, or both, which
are naturally bundled and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply.

* The tax rate of the principal supply applies to the entire composite supply.

* Example: A hotel providing accommodation along with breakfast. The principal supply is
accommodation, and breakfast is naturally bundled with it.

* Mixed Supply:

* A supply consisting of two or more taxable supplies of goods or services, or both, or any
combination thereof, which are supplied together by a taxable person for a single price, but
these supplies do not constitute a composite supply.

* The tax rate of the supply attracting the highest rate of tax applies to the entire mixed
supply.

* Example: A gift pack containing dry fruits, sweets, and chocolates. These items can be
supplied separately and are not naturally bundled.

* Place of Supply:

* Determines where the supply is deemed to have taken place.

* Crucial for determining whether a supply is intra-state or inter-state.

* Rules for place of supply differ for goods and services, and for domestic and
international transactions.

* Time of Supply:

* Determines when the tax liability arises.

* Different rules apply for goods and services.

* Factors considered include the date of issue of invoice, the date of receipt of payment,
and the date of completion of supply.

* Value of Taxable Supply:

* The basis on which GST is calculated.

* Generally, the transaction value is the price actually paid or payable for the supply.

* Includes certain additions and exclusions as specified in the law.

* Significance of Consideration:
 * "Consideration" is a crucial element for a transaction to be considered a supply.

* It means any payment made or to be made, whether in money or otherwise, for the
inducement of the supply of goods or services or both.

* However, certain activities specified in Schedule I are treated as supply even without
consideration.

2. Basis of Charge of GST, Inter-State Supply, Intra-State Supply, GST Rates Notified for
Supply of Various Goods and Services, Reverse Charge Mechanism, Composition Levy

* Basis of Charge of GST:

* Section 9 of the CGST Act is the charging section.

* GST is levied on all intra-state supplies of goods or services or both, except on the
supply of alcoholic liquor for human consumption.

* IGST is levied on all inter-state supplies of goods or services or both.

* Inter-State Supply:

* Supply of goods or services or both when the location of the supplier and the place of
supply are in two different states or two different union territories, or a state and a union
territory.

* IGST is levied on inter-state supplies.

* Intra-State Supply:

* Supply of goods or services or both when the location of the supplier and the place of
supply are in the same state or same union territory.

* CGST and SGST/UTGST are levied on intra-state supplies.

* GST Rates Notified for Supply of Various Goods and Services:

* GST rates are notified by the government and can be changed by the GST Council.

* Rates are categorized into different slabs (e.g., 0%, 5%, 12%, 18%, 28%).

* The GST rate schedule is very large and complex.

* Reverse Charge Mechanism (RCM):

* In certain cases, the recipient of goods or services is liable to pay GST instead of the
supplier.
 * This is called the reverse charge mechanism.

* Applicable in specific situations, such as when unregistered suppliers supply to

registered recipients, or for specified services.

* Composition Levy:

* A simplified scheme for small taxpayers with a turnover below a certain threshold.

* Taxpayers opting for the composition scheme pay a fixed percentage of their turnover as
tax.

* They cannot claim input tax credit.

* This scheme reduces the compliance burden.

3. Exemptions from GST, Power to Grant Exemptions, Exempted Goods Under Exemption
Notifications, Exempted Services Under Exemption Notifications

* Exemptions from GST:

* Certain goods and services are exempt from GST.

* Exemptions are granted by the government to achieve specific policy objectives.

* Power to Grant Exemptions:

* The government has the power to grant exemptions from GST under Section 11 of the
CGST Act.

* Exemptions can be granted by issuing notifications.

* Exempted Goods Under Exemption Notifications:

* A wide range of goods are exempt from GST, including essential food items, agricultural
produce, and certain healthcare products.

* The list of exempted goods is specified in various exemption notifications.

* Exempted Services Under Exemption Notifications:

* Similarly, various services are exempt from GST, including healthcare, education, and
certain financial services.

* The exemption notifications must be consulted to get the most updated list of exempted
services.

UNIT 3
1. Meaning, Eligibility and Conditions for Taking Input Tax Credit, Apportionment of Credit
and Blocked Credits, Availability of Credit in Special Circumstances, Taking Input Tax
Credit in Respect of Inputs and Capital Goods Sent for Job Work.

* Meaning of Input Tax Credit (ITC):

* ITC is a mechanism that allows registered taxpayers to reduce their output tax liability by
the amount of GST paid on their inputs (purchases).

* It prevents the cascading effect of taxes, ensuring that tax is levied only on the value
addition at each stage of the supply chain.

* Eligibility and Conditions for Taking Input Tax Credit:

* Registration: The taxpayer must be a registered person under GST.

* Tax Invoice: The taxpayer must possess a valid tax invoice or debit note issued by a
registered supplier.

* Receipt of Goods or Services: The goods or services must have been actually received.

* Payment to Supplier: 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.

* Furnishing of Returns: The taxpayer must have furnished the returns under Section 39.

* Time Limit: The taxpayer must take ITC within the prescribed time limit (earlier of the due
date for furnishing of 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 the
date of furnishing of the relevant annual return).

* Apportionment of Credit and Blocked Credits:

* Apportionment of Credit:

* If a taxpayer uses inputs or input services for both taxable and exempt supplies, the ITC
must be apportioned.

* The ITC attributable to taxable supplies can be claimed, while the ITC attributable to
exempt supplies cannot.

* Rule 42 and rule 43 provide the detailed calculation methods.

* Blocked Credits (Section 17(5)):

* Certain categories of ITC are specifically blocked and cannot be claimed.

 * Examples:

* Motor vehicles and conveyances (with certain exceptions).

* Food and beverages, outdoor catering, beauty treatment, health services, cosmetic
and plastic surgery (with certain exceptions).

* Membership of a club, health, and fitness center.

* Travel benefits extended to employees on vacation such as leave or home travel

concession.

* Works contract services when supplied for construction of an immovable property

(other than plant and machinery).

* Goods or services received by a non-resident taxable person except on goods

imported by him.

* Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

* Availability of Credit in Special Circumstances:

* New Registration: A person who applies for registration within 30 days from the date he
becomes liable to registration, is entitled to take ITC 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.

* Switching from Composition Scheme to Regular Scheme: ITC of inputs held in stock and
inputs contained in semi-finished or finished goods held in stock and capital goods on the
day immediately preceding the date from which he ceases to pay tax under the
composition scheme.

* Revocation of Cancellation of Registration: ITC of inputs held in stock and inputs

contained in semi-finished or finished goods held in stock and capital goods on the day
immediately preceding the date from which his registration is effective.

* Merger, Amalgamation, or Transfer: The transferee is allowed to take ITC that remains
unutilized in the electronic credit ledger of the transferor.

* Taking Input Tax Credit in Respect of Inputs and Capital Goods Sent for Job Work:

* A registered person can send inputs or capital goods to a job worker for processing
without paying GST.

* The principal can take ITC on the inputs or capital goods sent for job work, provided the
goods are received back within the prescribed time limits.
 * One year for inputs, and three years for Capital goods.

* If the goods are not received back within the time limit, it is deemed to be a supply from
the principal to the job worker on the day the goods were sent out.

2. Manner of Distribution of Credit by Input Service Distributor, Manner of Recovery of

Credit Distributed in Excess.

* Input Service Distributor (ISD):

* An ISD is an office of a supplier of goods or services or both, which receives tax invoices
issued under Section 31 towards the receipt of input services and issues tax invoices for
the purpose of distributing the credit of CGST, SGST/UTGST, or IGST paid on the said
services to a supplier of goods or services or both having the same Permanent Account
Number (PAN) as that of the said office.

* Manner of Distribution of Credit by Input Service Distributor:

* The ISD distributes the ITC to its recipients in the same proportion as the turnover of the
recipient bears to the aggregate turnover of the ISD and its recipients.

* The distribution is done through an ISD invoice.

* The ISD can distribute CGST as CGST, SGST as SGST, UTGST as UTGST, and IGST as
IGST.

* The ISD can distribute IGST as IGST, CGST and SGST/UTGST.

* Manner of Recovery of Credit Distributed in Excess:

* If the ISD distributes ITC in excess, the excess credit can be recovered from the
recipient.

* The excess credit can be recovered along with interest.

* If the recipient is found to have taken excess credit, normal recovery procedures under
the act will be initiated.

* Demand and recovery provisions under sections 73 and 74 would be applicable.