GST Framework & Supply

CS Executive Taxation | taxati-002

Welcome to the comprehensive study guide on GST Framework & Supply, one of the most crucial topics in the CS Executive Taxation syllabus. This module forms the bedrock of understanding India’s unified indirect tax system and is mandatory reading for every Company Secretary aspirant. The Goods and Services Tax (GST) represents India’s most significant tax reform since independence, replacing multiple cascading indirect taxes with a seamless, comprehensive tax regime.

This guide provides exhaustive coverage of the constitutional framework, key definitions, supply mechanics, time and place of supply rules, GST rates, registration requirements, input tax credit provisions, return filing procedures, and the reverse charge mechanism. Every section is structured to align with the CS Executive examination pattern, ensuring you are exam-ready.

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1. Constitutional Basis of GST

1.1 The 101st Constitutional Amendment Act, 2016

The constitutional foundation for GST in India was laid by the 101st Constitutional Amendment Act, 2016, which received Presidential assent on 8th April 2016 and came into effect on 16th September 2016. This amendment introduced Article 246A in the Constitution, creating a concurrent jurisdiction for the Centre and States to levy GST.

Key Changes Introduced by the 101st Amendment:

1. Article 246A — This new article (added after Article 246) grants Parliament and the legislatures of every State the power to make laws with respect to goods and services tax imposed by the Centre or States respectively. This is a concurrent power, meaning both Parliament and State legislatures can legislate on GST.

2. Article 269A — Introduced to provide for the levy and collection of GST on inter-State supplies. The Parliament has the exclusive power to make laws with respect to taxes on inter-State supply.

3. Article 279A — Created the GST Council as a recommendatory body, ensuring cooperative federalism between the Centre and States.

4. Article 286 — Amended to specify the restrictions on the power of States to levy tax on certain supplies. No State can levy tax on the supply of goods or services outside the State or in the course of import/export.

5. Article 366 — Amended to include definitions of key terms such as “goods and services tax” and “services.”

6. Article 368 — Amended to include GST-related provisions that require a special majority for amendment.

7. Article 279B — Provides for the Goods and Services Tax Council to be a constitutional body (though the Council as formed is a statutory body under Article 279A).

8. Subsuming of Entry 54 of List II (State List) — Taxes on the sale of goods (VAT) was a State subject; this has been subsumed into GST.

9. Subsuming of Entry 92 of List I (Union List) — Taxes on services was a Union subject; this has also been subsumed into GST.

Article 246A — The Core Provision:

“Notwithstanding anything in articles 246 and 254, Parliament, and, subject to clause (2), the legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.”

This article is the cornerstone of GST legality — it overrides the general distribution of legislative powers and creates a shared taxation domain for the Centre and States. Note that while both can legislate, Article 246A(2) provides that Parliament has exclusive power to make laws with respect to GST on inter-State supplies.

1.2 Article 279A — GST Council

Article 279A of the Constitution formally established the GST Council. While the article provides for the Council’s establishment, the Council itself is a statutory body constituted under the CGST Act, 2017.

Composition of the GST Council (Article 279A):

Member	Position
Union Finance Minister	Chairman
Union Minister of State (Revenue)	Member
Chief Ministers of States	Members
Finance Ministers of States	Members

Voting Power:

• The Union Government has 1/3rd of the votes of the total votes cast.
• All States collectively have 2/3rd of the votes.
• Decisions require a 3/4th majority (i.e., 75%) of the weighted votes of the members present and voting.

Special Feature: Each State has one vote regardless of its size, but the weighted vote is what matters for decision-making. This ensures smaller states cannot be completely overruled by larger states.

Key Functions and Recommendations of the GST Council:

The GST Council is empowered to make recommendations to the Centre and States on:

1. Taxes to be subsumed — Which Central and State taxes shall be merged into GST.
2. Goods and services to be exempted — Items to be kept outside the GST net.
3. Threshold limit — The exemption threshold for registration.
4. Rates of GST — The slab rates at which GST shall be levied.
5. Special rates — Rates for specified emergency situations.
6. Cess — Any special cess applicable on certain goods.
7. Model GST Laws — The CGST Act, IGST Act, and UTGST Act models.
8. Rules and regulations — Related to threshold limits, composition scheme, and exemptions.
9. Dispute resolution — Any dispute arising between the Centre and States regarding GST Council recommendations.

⚡ Exam tip: The GST Council is a recommendatory body — its recommendations are not binding on the Centre or States. However, the Article 279A(11) provides that Parliament and State legislatures are bound to act according to the Council’s recommendations on matters specified. In practice, the Centre has consistently respected the Council’s recommendations.

1.3 Taxes Subsumed Under GST

The GST regime subsumed multiple Central and State indirect taxes:

Central Taxes Subsumed:

Tax	Levied Under
Central Excise Duty	Central Excise Act, 1944
Additional Excise Duty	Various Finance Acts
Service Tax	Finance Act, 1994
Countervailing Duty (CVD)	Customs Act, 1962 (special)
Special Additional Duty of Customs (SAD)	Various enactments

State Taxes Subsumed:

Tax	Levied Under
Value Added Tax (VAT) / Sales Tax	State VAT Acts
Central Sales Tax	Central Sales Tax Act, 1956
Entry Tax	Various State Entry Tax Acts
Luxury Tax	State Luxury Tax Acts
Betting Tax	State Betting Tax Acts
Entertainment Tax	State Entertainment Tax Acts

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2. CGST Act, 2017 — Key Definitions (Section 2)

The Central Goods and Services Tax Act, 2017 (CGST Act) is the primary legislation governing GST in India. Section 2 of the CGST Act contains the most important definitions. Thorough understanding of these definitions is absolutely essential for both the examination and practical application.

2.1 Aggregate Turnover [Section 2(6)]

Definition:

“Aggregate turnover” means the aggregate value of all taxable supplies (excluding reverse charge supplies), exempt supplies, exports of goods or services, and inter-State supplies of a person having the same Permanent Account Number (PAN), to be computed on an all-India basis and excludes taxes charged thereon.

Key Elements:

• Aggregate turnover includes taxable supplies, exempt supplies, exports, and inter-State supplies.
• It excludes taxes (CGST, SGST/UTGST, IGST, Cess).
• It is computed on an all-India basis — not State-wise.
• It includes the value of all supplies made by a taxable person, regardless of whether they are taxable or not.
• It includes inter-State supplies (unlike under the earlier VAT regime).
• The value of inward supplies is not included.
• It is computed ** PAN-wise** — all branches/places of business under one PAN are aggregated.

Example: A company has branches in Delhi, Maharashtra, and Karnataka. The turnover of all branches is aggregated under one PAN to compute aggregate turnover. Even though CGST/SGST applies to intra-State supplies and IGST to inter-State supplies, the aggregate turnover is computed all-India.

Why It Matters:

• The threshold limit for compulsory registration (Rs. 40 lakhs general, Rs. 20 lakhs for special category States) is based on aggregate turnover.
• The composition scheme threshold (Rs. 1.5 crores) is based on aggregate turnover.
• Aggregate turnover determines eligibility for various GST benefits and compliance requirements.

🔴 High Priority: Aggregate turnover is computed all-India — a person making inter-State supplies worth Rs. 5 lakhs and intra-State supplies worth Rs. 35 lakhs has an aggregate turnover of Rs. 40 lakhs, crossing the general threshold of Rs. 40 lakhs and requiring compulsory registration.

2.2 Business [Section 2(17)]

Definition:

“Business” includes:

• Any trade, commerce, or manufacture
• Any profession, occupation, or vocation
• Any adventure or concern in the nature of trade, commerce, or manufacture
• Any contract, agreement, or arrangement (express or implied) for sale or purchase of goods or services
• Transactions incidental or ancillary thereto
• Provision by a club, association, society, or any organization for a consideration (whether realized in cash or otherwise)
• Service of making supply of goods or services by one unit of a business to another unit of the same business
• Admission, for a consideration, of persons to premises (clubs, hotels, etc.)
• Services of定型 hire purchase, lease, or any other manner of disposal of goods
• Sale or transfer of goods in the course of business
• Importation of services (whether or not in the course of business)
• Discontinued activities (even if discontinued after commencement of this Act)

Key Inclusions:

• Even occasional transactions can constitute business if they are in the nature of trade, commerce, or manufacture.
• The phrase “whether or not realized in cash” means barter transactions also constitute business.
• Transaction in the course of business — sale of business assets (like plant and machinery) even without profit motive.
• Importation of services even without a business connection in India — this is a major expansion from the earlier service tax definition.

2.3 Casual Taxable Person [Section 2(20)]

Definition:

“Casual taxable person” means a person who occasionally undertakes transactions involving supply of goods or services in the course or furtherance of business, in a State or Union Territory where he does not have a fixed place of business or residence.

Key Characteristics:

• The person must be occasional — not a regular taxpayer.
• The person does not have a fixed place of business in the State/UT where supply is made.
• The person may or may not have a residence in India.
• They are required to obtain registration regardless of turnover (no threshold exemption).
• They must pay advance tax (estimated GST) at the time of application for registration.
• The registration is valid for 90 days (extendable up to 1 year, but not beyond the end of the financial year).

Example: A craftsperson from Rajasthan participates in a trade fair in Maharashtra for 10 days and sells handmade goods. He has no fixed place of business in Maharashtra. He is a casual taxable person and must register under GST before making any supply, and pay advance tax.

⚡ Exam tip: Casual taxable persons are not eligible for the composition scheme because their presence is temporary and compliance tracking would be difficult. They must also file GSTR-1 and GSTR-3B like regular taxpayers but for the period of their registration.

2.4 Goods [Section 2(52)]

Definition:

“Goods” means every kind of movable property (including stocks, shares, growing crops, grass, and things attached to or forming part of the land) which is transferred in the course of trade or commerce.

Exclusions from the Definition of Goods:

• Money — Currency, bank notes, etc.
• Securities — Shares, debentures, etc. (though these may be treated as goods in some contexts pre-GST, they are excluded from the GST definition).

Key Points:

• Goods must be movable — immovable property (land, buildings) is not “goods.”
• However, growing crops, grass, and things attached to land are treated as goods even though they are technically part of the land.
• The transfer can be of any kind — sale, lease, hire, etc.
• Second-hand goods are also goods — GST applies to their supply.

2.5 Services [Section 2(102)]

Definition:

“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
• Immovable property transactions (letting, renting, etc.)
• Construction of a building, civil structure, or part thereof
• Transfer of property in goods (whether as goods or in some other form)

Key Understanding: GST is a tax on services — and the definition is residual. If something is not “goods,” “money,” or “securities,” it is “services.” This is a wide and inclusive definition.

What’s NOT Services:

1. Goods — tangible movable property
2. Money — currency, legal tender
3. Securities — shares, bonds, debentures

What’s INCLUDED in Services:

• Professional services (legal, accounting, consulting)
• Banking and financial services
• Hospitality services (hotels, restaurants)
• Transportation services
• Healthcare services
• Education services
• Telecom services
• Immovable property services (renting, construction)

2.6 Taxable Person [Section 2(107)]

Definition:

“Taxable person” means a person who is registered or liable to be registered under any of the following:

• Section 22 (compulsory registration)
• Section 24 (compulsory registration for certain persons)
• Section 25 (voluntary registration)
• Section 27 (casual taxable person)
• Section 29 (ICEBRK — though Section 29 is about cancellation of registration)

Two Categories of Taxable Persons:

Category	Description
Registered Taxable Person	Already obtained registration under GST
Liable to be Registered	Not yet registered but threshold crossed

Implications of Being a Taxable Person:

• Must collect and pay GST on outward supplies
• Can claim input tax credit on inward supplies
• Must file periodic returns (GSTR-1, GSTR-3B, GSTR-9)
• Must comply with invoicing and record-keeping requirements

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3. Supply — Meaning, Types, and Classification

3.1 Meaning of Supply [Section 7]

Section 7 of the CGST Act defines what constitutes a “supply” for GST purposes. This is one of the most important and frequently examined provisions.

Definition of Supply: Under Section 7, “supply” includes:

1. All forms of supply of goods or services or both — such as sale, transfer, barter, exchange, licence, rental, lease, or disposal.
2. Importation of services — even if made for consideration.
3. Supply without consideration (with exceptions — Schedule I).
4. Activities specified in Schedule I (treated as supply even without consideration).
5. Activities specified in Schedule II (treated as supply of goods or services).
6. Services by an employee to an employer in the course of employment — NOT a supply.

Forms of Supply (Section 7(1)):

Form	Description
Sale	Transfer of ownership for consideration
Transfer	Movement of goods without change of ownership
Barter/Exchange	Supply in return for another supply
Licence	Grant of right to use
Rental	Temporary use against payment
Lease	Transfer of right to use for a period
Disposal	Giving away, surrender

Schedule I — Supplies Without Consideration (Deemed Supply): The following supplies made without consideration are still treated as supply:

1. Permanent transfer/disposal of business assets (even if partially used for personal purposes)
2. Supply of goods between related persons or distinct persons (same PAN, different States)
3. Supply of services between related persons or distinct persons (same PAN, different States)
4. Goods lent/brought into India for supply in India

Important Clarification:

• Supply between related persons (as defined under Section 15) is treated as supply even without consideration.
• Supply between an unregistered person and a registered person (where the registered person is the recipient) in the course of further supply — is not treated as supply if no consideration is involved.

Schedule II — Activities Treated as Supply of Goods or Services:

Activity	Treated As
Transfer of title in goods	Supply of goods
Transfer of right in goods (not as goods)	Supply of services
Transfer of title in goods pursuant to hire purchase agreement	Supply of goods
Letting out of immovable property for business use	Supply of services
Construction of building/civil structure for personal use	Supply of services
Temporary transfer/permissive use of intellectual property	Supply of services
Works contract	Supply of goods or services (depending on dominant purpose)

3.2 Types of Supply

3.2.1 Inter-State Supply [Section 9 — IGST]

Section 9 of the CGST Act provides that inter-State supplies are subject to Integrated Goods and Services Tax (IGST).

What is Inter-State Supply? A supply is inter-State if:

1. The location of the supplier is in one State/UT.
2. The place of supply is in another State/UT.
3. The supply involves movement of goods or services from one State to another.

Key Point: Inter-State supplies attract IGST — not CGST + SGST. The IGST mechanism allows for cross-utilization of input tax credit between Central and State taxes.

Example: A supplier in Gujarat sells goods to a buyer in Maharashtra. This is an inter-State supply because the location of the supplier (Gujarat) is different from the place of supply (Maharashtra). IGST applies.

Special Cases:

Situation	Treatment
Supply to an unregistered person in another State	Inter-State supply, IGST applies
Branch transfer between States (same PAN, different States)	Inter-State supply, IGST applies
Stock transfer between States	Inter-State supply, IGST applies
Export from India	Treat as inter-State, but zero-rated (0% GST)
Import into India	Deemed inter-State, IGST applies

3.2.2 Intra-State Supply

A supply is intra-State if:

1. The location of the supplier is in one State.
2. The place of supply is in the same State.
3. The supply does not involve movement across State boundaries.

Tax Treatment: Intra-State supplies attract CGST + SGST (or CGST + UTGST in Union Territories).

Example: A shop in Delhi sells goods to a customer in Delhi. Both the supplier and place of supply are in Delhi. This is an intra-State supply — CGST + SGST applies.

3.2.3 Composite Supply [Section 2(30)]

Definition:

“Composite supply” means a composite of two or more taxable supplies of goods or services, or both or any combination thereof, made by the same taxable person to the same recipient:

• Which are naturally bundled in the ordinary course of business
• Which cannot be supplied separately
• One of which is the principal supply

Key Elements of Composite Supply:

1. Two or more taxable supplies — goods, services, or both.
2. Made by the same taxable person.
3. Made to the same recipient.
4. Supplies are naturally bundled in the ordinary course of business.
5. Cannot be supplied separately — the recipient cannot choose to take only one component.
6. One of the supplies must be the principal supply.

How to Identify Composite Supply:

Criterion	Explanation
Natural Bundling	Supplies that normally go together in business
Cannot Supply Separately	The supplier cannot offer each component independently
Principal Supply	The component that gives the supply its essential character

Tax Rate for Composite Supply: The GST rate of the principal supply applies to the entire composite supply. This is the most important examination point.

Examples:

Supply	Principal Supply	Rate Applied
Hotel room + Breakfast	Hotel accommodation (principal)	Hotel rate
Travel + Accommodation package	Travel (principal)	Travel rate
Computer + Software installation	Computer (principal)	Computer rate
Car + Car insurance	Car (principal)	Car rate

⚡ Exam tip: The key to identifying composite supply is asking: “If one component is unavailable, would the whole supply collapse?” If yes, it is composite supply. If the recipient can pick and choose components independently, it is likely mixed supply.

3.2.4 Mixed Supply [Section 2(74)]

Definition:

“Mixed supply” means two or more individual supplies of goods or services, made jointly by the same taxable person to the same recipient, under a single arrangement, but:

• Which are not naturally bundled in the ordinary course of business
• The components can be supplied separately (either independently or in combination)
• They are merely put together for the convenience of the customer or for administrative convenience

Key Distinction from Composite Supply:

Aspect	Composite Supply	Mixed Supply
Natural Bundling	Yes, in ordinary course	No, artificially combined
Can Supply Separately?	No — cannot be split	Yes — can be separated
Bundle Type	Organic, essential combination	Administrative convenience bundle
Rate Determination	Rate of principal supply	Highest rate among all supplies

Tax Rate for Mixed Supply: The GST rate of the highest rated component in the mixed supply applies to the entire supply.

Examples:

Mixed Supply	Highest Rate Component	Rate Applied
Package of pan masala + soda	Pan masala (highest rate)	Pan masala rate
Gift hamper (sweets + chocolates + dry fruits)	Chocolates (highest rate)	Chocolates rate
Cricket bat + ball + gloves	Cricket bat	Highest rate
Book + pen + pencil	Usually book	Highest rate among items

🔴 High Priority: This is a frequently examined distinction. Always ask: (1) Are supplies naturally bundled in ordinary course? (2) Can they be supplied separately? If natural bundling exists and separation is not possible → Composite Supply. If artificially combined and can be separated → Mixed Supply.

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4. Time of Supply

The time of supply determines when GST becomes chargeable and when the taxpayer must issue an invoice. This is critical for determining the tax period in which liability must be deposited.

4.1 Time of Supply for Goods [Section 12]

General Rule — Section 12(2): The time of supply for goods is the earliest of:

1. The date on which the supplier issues an invoice in respect of the supply.
2. The date on which the recipient receives the goods (if goods are received before the invoice).
3. The date on which payment is made by the recipient (if payment is made before the invoice).

Special Rules for Reverse Charge:

• For supplies subject to reverse charge, the time of supply is the date on which the recipient makes the payment.
• If payment is not made within 90 days of the invoice date, the time of supply is the 91st day from the invoice date.

Supply Involving Movement of Goods:

• If goods are dispatched before the invoice is issued, the time of supply is the date of dispatch.
• If goods are delivered subject to approval (sale on approval basis), the time of supply is the earlier of:
  • Date of acceptance by the recipient.
  • 60 days from the date of delivery (or such other period as notified).

Continuous Supply of Goods: For continuous supply (goods supplied periodically under a contract):

• If each payment triggers an invoice → time of supply is the date of that payment/relevant invoice, whichever is earlier.
• If a statement of account is issued periodically → time of supply is the date of the statement.

4.2 Time of Supply for Services [Section 13]

General Rule — Section 13(2): The time of supply for services is the earliest of:

1. The date on which the supplier issues an invoice in respect of the supply.
2. The date on which the service is completed (if completed before the invoice is issued).
3. The date on which the recipient makes payment (if payment is made before the invoice).

Continuous Supply of Services: For continuous supply where a periodic statement of services is issued:

• The time of supply is the date of the relevant statement or the date of payment, whichever is earlier.

Special Cases:

Situation	Time of Supply
Invoice issued after 30 days of supply	Date of supply (i.e., date service was performed)
Reverse charge supplies	Date of payment by recipient
Payment not made within 90 days of invoice	91st day from invoice date
Services from associates/related persons	Earlier of date of payment or invoice

Vouchers and Pre-Payments:

• If a voucher is issued before the supply, the time of supply is when the voucher is redeemed.
• If a prepayment is received before the supply, the time of supply is when the supply actually occurs.

⚡ Exam tip: For goods, the time of supply considers the date of removal/dispatch as a key benchmark. For services, the date of completion of service is key. Both converge on the principle that the earliest of invoice, payment, or receipt/delivery determines the time of supply.

4.3 Rule of Ascertainment

The rule of ascertainment under GST is straightforward:

For Goods [Section 12]:

TOS = Earlier of Invoice Date OR Date of Receipt of Goods OR Date of Payment

For Services [Section 13]:

TOS = Earlier of Invoice Date OR Date of Completion of Service OR Date of Payment

Exception for Reverse Charge: For reverse charge supplies, the TOS is always the date of payment by the recipient — regardless of when the invoice is issued or the goods/services are received.

Change in Rate of Tax: If the rate of tax changes after the time of supply:

• If the supply has already occurred → old rate applies (based on original TOS).
• If the supply occurs after the rate change → new rate applies.
• If advance is received before the rate change but supply occurs after → new rate applies (Section 14).

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5. Place of Supply

The place of supply determines whether a supply is inter-State or intra-State, and therefore which tax (IGST or CGST+SGST) applies.

5.1 Place of Supply for Goods [Section 10]

General Rule — Section 10(1): The place of supply of goods is the location of goods at the time of delivery to the recipient.

This means:

• If goods are delivered at the recipient’s place of business → that place is the place of supply.
• If goods are delivered at some other location → that location is the place of supply.

Special Rules for Specific Scenarios:

Scenario	Place of Supply
Goods assembled/installed at recipient’s site	Location of installation/assembly
Goods supplied on approval basis	Place where goods are accepted or 60 days from delivery
Movement of goods (sales not involving movement)	Location of goods at the time of delivery
Goods supplied to an unregistered person	Location of goods at the time of delivery
Import of goods	Location of importer (as per import records)
Export of goods	Location outside India

Bill-to-Ship-to Scenario: If goods are ordered from location A but shipped directly to location B:

• The invoice is issued to the buyer at location A.
• The goods are delivered to location B.
• The place of supply = Location B (place of delivery).

5.2 Place of Supply for Services [Section 12]

General Rule — Section 12(2): The place of supply of services is the:

1. Location of the recipient of services.
2. If the services are notifiable services (specified under Section 12(3) to 12(14)) — specific rules apply.

General Test: If services are provided to a registered person → location of such registered person (address on record).

If services are provided to an unregistered person → location of the recipient (ordinary residence/business location).

Specific Rules for Different Service Categories:

Service Type	Place of Supply
Immovable property services (rental, hotel, lodging, banquet)	Location of the property
Restaurant services	Where services are actually performed
Transportation services	Place of embarkation
Telecom services (to individuals)	Billing address of recipient
Banking/financial services	Location of recipient’s business
Online information database access (OIDB)	Location of recipient

Services to Unregistered Persons (B2C):

Service Type	Place of Supply
Services provided in India	Location of service provider
Services provided outside India	Not liable to GST in India

Location of Recipient — Key Test:

• If recipient has a place of business (registered person) → location of that business.
• If recipient has no place of business → location of ordinary residence.
• If multiple locations → location primarily concerned.

⚡ Exam tip: The place of supply for services is generally the location of the recipient (recipient-based approach), while for goods it is the location of goods at delivery (delivery-based approach). This distinction is crucial in the examination.

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6. GST Rates

6.1 GST Rate Structure

India’s GST follows a multi-rate slab structure designed to balance revenue collection with inflation control and equity considerations.

Current GST Rate Slabs:

Slab Rate	Description	Typical Items
0%	Exempt / Nil Rate	Fresh fruits, vegetables, milk, bread, education, healthcare
5%	Lower Rate	Sugar, tea, edible oil, economy rail travel, small restaurants
12%	Standard Rate	Computers, processed food, business class air travel, medicines
18%	Standard Rate	Most services, fast-moving consumer goods, financial services
28%	Highest Rate	Luxury items, sin goods (tobacco, aerated drinks), cars > Rs. 10L
Cess	Additional	Sin goods (tobacco products, automobiles) on top of 28%

6.2 GST Compensation Cess

Cess is an additional levy over and above the 28% slab, specifically designed to compensate States for revenue losses arising from GST implementation during the transition period (2017-2022, extended multiple times).

Goods Attracting Cess (on top of 28% GST):

Category	Cess Rate
Tobacco products (gutka, pan masala, cigarettes)	204% (varies by product)
Aerated waters / sugary drinks	12%
Coal, lignite, and peat	Rs. 400/tonne
Motor vehicles (petrol) > 1200cc or > 4m length	22% or 25% (varies)
Motor vehicles (diesel) > 1500cc or > 4m length	22% or 25% (varies)
SUVs (petrol/diesel, > 1500cc)	22%
Large cars (> Rs. 10L, < Rs. 20L)	22%
Hybrid/imported luxury cars	22%
Cinema tickets > Rs. 100	10% (up to Rs. 250), 15% (> Rs. 250)

6.3 GST Rate Changes and Impact

GST rates are subject to change based on GST Council recommendations. Some important clarifications:

• Rate reduction is applied from the date of notification.
• If advance payment is received before the rate reduction but invoice is issued after → old rate applies.
• If advance payment is received before rate increase but invoice issued after → new rate applies.

Composition Scheme Supplies: Suppliers opting for the composition scheme (Section 10) charge GST at:

• 1% for manufacturing (CGST 0.5% + SGST 0.5%)
• 5% for restaurants (not serving alcohol) (CGST 2.5% + SGST 2.5%)
• 3% for other services (CGST 1.5% + SGST 1.5%)

🔴 High Priority: GST rates and cess are frequently updated through notifications. In the examination, use the rates provided in the question paper. Do not rely on memorized rates if the question provides specific rate information.

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7. GST Registration

7.1 Compulsory Registration [Section 22]

Threshold Limits for Registration:

Category	Threshold Limit
General States	Aggregate turnover exceeding Rs. 40 Lakhs
Special Category States*	Aggregate turnover exceeding Rs. 20 Lakhs
NE/Hill States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand)	Aggregate turnover exceeding Rs. 20 Lakhs
Persons making inter-State supplies	No threshold — must register regardless of turnover
Casual taxable persons	No threshold — must register before making any supply
Persons liable under reverse charge	No threshold — must register
E-commerce operators	No threshold — must register
Non-resident taxable persons	No threshold — must register

Note: The Rs. 40L / Rs. 20L threshold applies on a financial year basis — computed on aggregate turnover from 1st April to 31st March.

Aggregate Turnover Calculation for Threshold:

• Include: Taxable supplies + Exempt supplies + Exports + Inter-State supplies
• Exclude: CGST, SGST, IGST, Cess (tax amounts)
• Computed on all-India basis under one PAN

7.2 Exemptions from Registration [Section 23]

Persons NOT liable to registration:

1. Exempt supplies only — Persons making only exempt supplies (no taxable supplies) are not required to register.

   • Example: Agricultural produce in primary form, fresh milk, bread, etc.

2. Small service providers — Service providers with aggregate turnover less than Rs. 20 lakhs (Rs. 10 lakhs for special category States) are not required to register if they make only services (no goods).

   • This exemption is not available if the person is making inter-State supplies.

3. Goods only traders — Persons exclusively engaged in sale of exempted goods (not taxable at all) are exempt from registration.

Who MUST Register Regardless of Threshold: Even if aggregate turnover is below the threshold, the following must register:

• Persons making inter-State supplies
• Persons liable under reverse charge mechanism
• Casual taxable persons
• Non-resident taxable persons
• E-commerce operators
• Persons supplying through e-commerce operators (if required by the operator)
• TDS deductors (if applicable)
• TCS collectors (if applicable)

⚡ Exam tip: The key distinction is between threshold exemption (not required to register) and compulsory registration (must register). Threshold exemption is only available for intra-State supplies of goods or services that are taxable. Any inter-State supply automatically triggers compulsory registration.

7.3 Voluntary Registration [Section 25]

Any person who is not liable to register (i.e., below threshold) may still opt for voluntary registration under Section 25. This allows:

• Collection of GST on outward supplies (making the supplier competitive)
• Claim of input tax credit on inward supplies
• Issuance of tax invoices to allow recipients to claim ITC

Voluntary registrants have the same compliance obligations as compulsory registrants — including filing all periodic returns and maintaining records.

Cancellation of voluntary registration is possible but may have implications including:

• Reversal of input tax credit
• Liability for tax on stock held
• Penalties for non-compliance during the period of registration

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8. Input Tax Credit Mechanism

8.1 ITC Eligibility [Section 16]

Basic Conditions for Claiming ITC [Section 16(1)]: Every registered taxable person is entitled to claim ITC on:

1. Receipt of goods or services or both.
2. The goods or services are used or intended to be used for furtherance of business.
3. The tax charged is payable by the supplier.
4. The supplier has actually paid the tax to the government.
5. The recipient has received the goods or services.
6. A valid tax invoice or debit note is in possession.

Documents Required for ITC Claim:

Document	Issued By	Purpose
Tax Invoice	Supplier	Primary document for claiming ITC
Debit Note	Supplier	Additional tax on price increase
Credit Note	Supplier	Reduction of tax on discount/return
Supplementary Invoice	Supplier	Correction of invoice details

ITC can be claimed in the following situations:

1. On receipt of goods (when goods are received)
2. On receipt of services (when service is completed)
3. On receipt of goods returned by recipient
4. On receipt of credit/debit notes
5. On receipt of goods from job worker
6. On capital goods received

8.2 Change of Rate of Tax [Section 18]

Section 18 deals with the treatment of ITC when the rate of tax changes.

Key Provisions:

Situation	Treatment
Rate of tax increases after supply	Recipient can still claim ITC when invoice is received (even if dated before rate change)
Rate of tax decreases after supply	No reversal required — ITC already claimed can be retained
Rate of tax increases before supply (advance received)	New rate applies to advance; balance ITC on goods/services when received
If recipient has already paid tax at old rate and rate decreases	Supplier must issue refund voucher or credit note for excess tax charged

No ITC reversal is required for rate reductions — the benefit of reduced tax burden flows through automatically.

⚡ Exam tip: The principle is that rate increases do not deprive recipients of already-accumulated ITC — they can claim it when they receive the invoice. Rate decreases don’t require reversal of already-claimed ITC — this prevents windfall recoveries by the government.

8.3 Input Tax Credit — Blocked Credits [Section 17(5)]

ITC is NOT available on the following (blocked credits):

Category	Explanation
Motor vehicles (for personal use)	Cars, motorcycles used for non-business purposes
Food and beverages	Unless in the course of business (resale, as part of composite supply)
Outdoor catering	Unless for business (resale, employee welfare)
Health services	Unless for making taxable supplies
Membership of clubs/health centres	Personal consumption
Travel benefits to employees	Leave travel concession, etc.
Goods/services for personal use	Not for business purposes
Goods lost, stolen, written off	During the period of loss
Composition taxpayers	Cannot claim ITC (composition scheme inverts the credit chain)

ITC Available in Limited Cases:

• ITC on motor vehicles is available if used for:
  • Further supply (reselling)
  • Transport of passengers
  • Imparting driving skills
  • Towing services
• ITC on food and beverages is available if:
  • Purchased for resale (as goods)
  • Part of a composite supply where food is not the principal element
  • Used in a restaurant service (if the restaurant itself is a taxable supply)
• ITC on health services is available if:
  • Health services are supplied as part of business
  • Or the goods/services are used for making taxable supplies

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9. Returns Under GST

9.1 GSTR-1 — Outward Supplies

GSTR-1 is the return filed by every registered taxable person to report details of all outward supplies made during a tax period.

Filed By: All registered taxpayers (regular suppliers) Filing Frequency: Monthly (for taxpayers with turnover > Rs. 5 Crores) or Quarterly (for composition scheme suppliers — via GSTR-1A amendment)

Details to be Reported in GSTR-1:

• Invoice-level details of all outward supplies
• Debit notes and credit notes issued
• Revised invoices
• Advances received (with amendment in subsequent period)
• Exports with shipping bill details
• Inter-State supplies with recipient’s GSTIN
• HSN-wise summary of supplies

Due Date:

• Monthly filers: 10th of the next month
• Quarterly filers (composition): 13th of the next month after quarter end

9.2 GSTR-3B — Summary Return

GSTR-3B is a summary return filed by all regular taxpayers to declare:

• Gross tax liability (summary of outward supplies)
• ITC claimed (summary of inward supplies)
• Tax payable (net liability)
• TDS/TCS credits (if applicable)

GSTR-3B is not a replacement for GSTR-1 — GSTR-1 details the invoices, while GSTR-3B is a consolidated self-declaration of tax liability.

Due Dates:

• 20th of the next month for monthly filers
• 22nd/24th of the month after quarter end for quarterly filers

Late Fee:

• Rs. 50/day (Rs. 25 CGST + Rs. 25 SGST) for nil/zero liability
• Rs. 20/day (Rs. 10 CGST + Rs. 10 SGST) for nil/zero liability if T/O < Rs. 5 Crores
• Maximum late fee: Rs. 10,000 (Rs. 5,000 CGST + Rs. 5,000 SGST)

9.3 GSTR-9 — Annual Return

GSTR-9 is the annual return filed by every registered taxable person summarizing the entire year’s transactions.

Who Must File:

• All regular taxpayers
• Normal taxpayers (not composition suppliers)

Not Required to File:

• Composition suppliers (file GSTR-9A instead)
• Casual taxable persons (file GSTR-9 for period of registration)
• Non-resident taxable persons (file GSTR-9)
• TDS/TCS deductors (separate annual returns)

GSTR-9 Reconciliation: GSTR-9 requires reconciliation of:

• Outward supplies (GSTR-1 vs GSTR-3B)
• Input tax credit (GSTR-2A vs GSTR-2 vs GSTR-3B)
• Taxes paid (GSTR-3B vs cash ledger)

Due Date: 31st December of the next financial year

9.4 GSTR-4 — Composition Return

GSTR-4 is filed by taxpayers who have opted for the composition scheme under Section 10.

Filing Frequency: Quarterly (with annual return GSTR-9A)

Details in GSTR-4:

• Summary of outward supplies (taxable value + GST)
• Inward supplies subject to reverse charge
• Tax liability for the quarter
• Payment of tax (with challan)

Due Date: 18th of the month after quarter end

Annual Return for Composition Taxpayers:

• GSTR-9A is the annual return filed by composition taxpayers
• Due date: 31st December of the next financial year

🔴 High Priority: Remember the due dates: GSTR-1 (10th/13th), GSTR-3B (20th/22nd/24th), GSTR-9 (31st December), GSTR-4 (18th). Missing deadlines attracts late fee and may also attract interest on tax liability.

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10. Reverse Charge Mechanism

10.1 Concept of Reverse Charge

Under the normal GST mechanism, the supplier of goods or services is responsible for collecting and paying GST to the government. Under the Reverse Charge Mechanism (RCM), this responsibility shifts to the recipient of the goods or services.

When RCM Applies: The recipient must:

1. Pay GST directly to the government (instead of the supplier)
2. Claim ITC on the same (subject to eligibility)
3. Issue a self-invoice documenting the reverse charge transaction

10.2 Reverse Charge — Section 9(3)

Section 9(3) specifies specified categories of supplies where RCM is mandatory — the recipient must pay tax under reverse charge regardless of their status.

Supplies Covered Under Section 9(3) [Mandatory RCM]:

Category	Examples
Casual taxable person	Supplies from casual taxable persons
Non-resident taxable person	Services from foreign service providers
Taxable person buying from unregistered person	Purchase of goods/services from unregistered supplier above threshold
E-commerce operator (certain supplies)	Supplies facilitated through e-commerce platform
Government departments	Services provided to Government
Specific goods	Rice, tobacco, raw cotton, etc. (as notified)
Transportation services	GTA services, transport of goods by rail

10.3 Reverse Charge — Section 9(4)

Section 9(4) originally required that ALL purchases from unregistered persons attract RCM — this was a widely debated provision.

Current Status:

• Section 9(4) was suspended for a long period and finally amended.
• Currently, RCM under Section 9(4) applies to specific notified categories of supplies from unregistered persons — not all purchases.

Notification-Based RCM [Section 9(4)]: The government can notify specific categories where RCM under Section 9(4) applies. As of current provisions:

• RCM on unregistered supplies is limited to specific notified categories.
• Most B2C supplies from unregistered persons are not under RCM for regular registered taxpayers.

Key Compliance Points for RCM:

1. Identify whether the supply falls under RCM.
2. Issue a self-invoice (purchase invoice with “Reverse Charge Applicable” mentioned).
3. Pay tax under RCM by the due date (through cash ledger).
4. Claim ITC of the tax paid (subject to Section 17(5) restrictions).
5. Report the RCM transaction in GSTR-3B (Table 3.1(d) for supplies under RCM and Table 4 for ITC from RCM).

⚡ Exam tip: The key distinction is Section 9(3) (specified categories, always RCM) vs Section 9(4) (notification-based, applies only when notified). In the examination, always check whether the question refers to a specific notified category or a general unregistered purchase.

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11. Key Amendments and Updates

11.1 Major Changes Post-2017

The GST regime has undergone significant amendments since its rollout:

Amendment	Impact
Section 9(4) suspended	RCM on unregistered purchases largely suspended
Composition scheme rate changes	Multiple changes in composition rates
E-invoicing	Mandatory for businesses with turnover > Rs. 10 Crores
E-way bill expansion	Universal e-way bill for inter-State; State-wise for intra-State
Return filing simplified	Quarterly return monthly payment (QRMP) scheme for small taxpayers
New returns	Realignment of GSTR-1, GSTR-3B, GSTR-2/2A

11.2 QRMP Scheme

The Quarterly Return Monthly Payment (QRMP) scheme allows small taxpayers (aggregate turnover up to Rs. 5 Crores) to:

• File GSTR-1 quarterly (amended to GSTR-1A for auto-population)
• Pay GST monthly (by the 25th of each month) using Furnishing of challan (GSTR-4A concept)
• File GSTR-3B quarterly with simplified two-rate monthly payment

Eligibility:

• Aggregate turnover ≤ Rs. 5 Crores in preceding financial year
• Not opting for composition scheme
• Furnishing of GSTR-1 and GSTR-3B regularly

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Summary and Quick Recap

Key Points to Remember:

1. Constitutional Basis: GST is backed by Article 246A (concurrent power), Article 279A (GST Council), and the 101st Amendment Act, 2016.

2. Key Definitions: Aggregate turnover (all-India PAN-wise), Business (wide inclusive definition), Goods (movable property excluding money and securities), Services (residual — everything not goods, money, or securities).

3. Supply Types:

   • Composite supply → Rate of principal supply (naturally bundled)
   • Mixed supply → Rate of highest rated component (artificially combined)

4. Time of Supply:

   • Goods: Earlier of invoice date, receipt of goods, or payment
   • Services: Earlier of invoice date, completion of service, or payment
   • RCM: Date of payment by recipient

5. Place of Supply:

   • Goods: Location at time of delivery
   • Services: Location of recipient (general rule)

6. Registration Threshold:

   • General: Rs. 40 Lakhs
   • Special category States: Rs. 20 Lakhs
   • Inter-State supplies: No threshold

7. ITC Conditions: Must receive goods/services, use for business, tax paid by supplier, valid invoice, ITC not blocked.

8. Returns:

   • GSTR-1: Outward supplies (10th/13th)
   • GSTR-3B: Summary return (20th/22nd)
   • GSTR-9: Annual return (31st December)
   • GSTR-4: Composition quarterly (18th)

9. Reverse Charge: Section 9(3) — mandatory specified categories; Section 9(4) — notification-based.

🔴 High Priority for Exam: The distinction between composite supply and mixed supply (rate determination), the time of supply rules (earliest of three events), and the reverse charge provisions (Sections 9(3) and 9(4)) are the most frequently examined areas. Practice numerical problems on all these sections.

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Practice Questions

1. Define “aggregate turnover” and explain its significance in determining GST registration threshold. How does it differ from “turnover” under the earlier VAT regime?

2. Distinguish between “composite supply” and “mixed supply” with examples. How is the GST rate determined in each case?

3. Explain the time of supply rules for goods and services under Sections 12 and 13 of the CGST Act. Under what circumstances does the rule of 90 days apply?

4. What is the constitutional basis of GST in India? Explain the role and composition of the GST Council under Article 279A.

5. Explain the reverse charge mechanism under Sections 9(3) and 9(4) of the CGST Act. When did Section 9(4) come into effect and what was its significance?

6. A supplier in Gujarat sold goods to a customer in Gujarat worth Rs. 35 lakhs. He also exported goods worth Rs. 10 lakhs. Is he required to register under GST? Discuss with reference to the relevant provisions.

7. Explain the conditions for claiming input tax credit under Section 16 of the CGST Act. What are the blocked credits under Section 17(5)?

8. What is the difference between GSTR-1, GSTR-3B, and GSTR-9? Explain the due dates and persons required to file each return.

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This guide covers the foundational concepts of GST Framework & Supply as required for CS Executive Examination. The next module, taxati-003, covers Input Tax Credit & Compliance in greater depth.