Unit 3: Goods and Services Tax

• Central Board of Indirect Taxes and Customs (CBIC) under the Department of Revenue, Ministry of Finance — administers CGST, IGST, customs and central excise.
• State tax departments — SGST and state taxes on petroleum and liquor.
• GST Council — recommends rates, exemptions, thresholds and laws.
• GSTN (Goods and Services Tax Network) — IT backbone for registration, returns, payments.
• Appellate structure: Appellate Authority → GST Appellate Tribunal (GSTAT) → High Court → Supreme Court; Authority for Advance Ruling (AAR) and Appellate AAR.

GST Council (Article 279A)

• Chairperson: Union Finance Minister; members: Union MoS (Revenue/Finance) and the Finance/Taxation Minister of each state.
• Quorum: one-half of total members. Decisions: at least three-fourths of weighted votes — Centre one-third, states together two-thirds.
• Functions: recommends taxes to be subsumed, exempted goods and services, model GST laws, rates and slabs, thresholds, special provisions for special category states, dispute resolution.
• Legislation: CGST Act 2017, IGST Act 2017, UTGST Act 2017, GST (Compensation to States) Act 2017 and 31 SGST Acts.

• Settlement of IGST: the Centre transfers the SGST portion of IGST to the consuming (destination) state — making GST destination-based.

The taxable event under GST is supply of goods or services or both.

• Schedule I (without consideration): permanent transfer of business assets where ITC was availed; supplies between related persons or distinct persons (branches in different states) in the course of business; principal–agent supplies; import of services from a related person abroad. Gifts up to ₹50,000 a year by an employer to an employee are not supply.
• Schedule II examples: transfer of title in goods = supply of goods; lease or rental = supply of services; works contract and restaurant service = supply of services.
• Schedule III (not supply): services by an employee to an employer; services by courts and MPs/MLAs; funeral and burial services; sale of land and (generally) completed building; actionable claims other than specified actionable claims (lottery, betting, gambling, online gaming, horse racing); high-sea sales; merchant trade.

• Section 9 (CGST) / Section 5 (IGST): tax levied on all intra-state (CGST) or inter-state (IGST) supplies on the value determined under Section 15, at rates notified on Council recommendation — CGST up to 20%, IGST up to 40%.
• Exclusions: alcoholic liquor for human consumption; five petroleum products until notified.
• Who pays: normally the supplier (forward charge); under reverse charge, the recipient; e-commerce operators pay tax on certain services (Section 9(5)) — passenger transport (cab aggregators), accommodation, restaurant services through apps.
• Threshold for registration: aggregate turnover above ₹40 lakh (goods, most states), ₹20 lakh (services), ₹20 lakh/₹10 lakh in special category states.

• Must mention "composition taxable person, not eligible to collect tax on supplies" on the bill of supply and at the place of business.

Under RCM, the recipient pays the tax instead of the supplier.

• The recipient must register (no threshold) and pay tax in cash; ITC of RCM tax is available if used for business.
• Self-invoice must be issued for supplies from unregistered persons.

• The Central Government, on the recommendation of the GST Council, may exempt goods or services generally (by notification — absolutely or conditionally) or specially (by special order in exceptional circumstances).
• Exempt supply includes nil-rated, non-taxable and wholly exempt supplies; no ITC is available on inputs used for exempt supplies.

Important exemptions

Input tax credit (ITC) — GST paid on inputs, input services and capital goods used in the course of business can be set off against output tax.

Conditions (Section 16)

• Possession of a tax invoice/debit note; goods or services received; supplier has paid the tax and the invoice appears in GSTR-2B; recipient files returns; payment to supplier within 180 days (else ITC reversed with interest).
• Time limit: ITC must be claimed by 30 November following the end of the financial year (or the annual return date, if earlier).

Blocked credits (Section 17(5))

Motor vehicles for passenger transport (≤ 13 persons, except for specified businesses), food and beverages, outdoor catering, beauty treatment, health services, club membership, travel benefits for employees on vacation, works contract and construction of immovable property (other than plant and machinery), goods lost, stolen, destroyed or given as free samples, tax paid under composition, personal consumption.

• Apportionment (Section 17(1)–(2)): ITC on inputs used partly for exempt supplies is reversed proportionately (Rules 42–43).